Monday Market Movement – The Gathering Storm

Things are deteriorating.

Last Monday, I warned:  "Friday, in addition to NFP, we have 3 Fed speakers – which makes me think the NFP report is going to be disappointing and they are lined up to spin it."  The Non-Farm Payroll Report was indeed a disappointment, with only 199,000 jobs added in December, just 1/2 of what had been predicted by leading Economorons.

It was, overall, the terrible week for the markets – especially the NASDAQ, which fell 1,000 points (6%) – 2/3 of the way to our predicted correction at 15,000.  It will, however, be a sad state of affairs if the 15,000 line on the NASDAQ does not provide at least some support for a bounce. This stage, a weak bounce would be 200 points and the strong mounts would be 400 points – those are the tests we will be looking for this week.  

A 10% correction on the Dow would take us all the way to 33,000 and 4,320 on the S&P 500 and 2,200 on the Russell and, oops, we just failed 2,200 on the Russell last week and that was the sign we've been watching for all winter to tell us when it was time to hedge more aggressively.  So the other major thing that we have to watch out for this week is whether or not the Russell can take back that 2,200 line.  If not, there's not much hope for a recovery from the other indexes and it becomes very likely that we are heading lower.  

We prepared for this on Friday by adding $327,000 of additional downside protection to our Short-Term Portfolio (STP), but in such a way that we are now able to cash in some of our early Russell hedges if the index gets back over that 10% line.  The Dollar is still strong, up around 96, which means it has a lot of room to fall and support the indexes should we get any Fed speak to indicate a softer stance.

That brings us to our Economic Calendar and, this week, we have a good amount of data starting with the Fed's Bostic (slightly hawkish) at noon today and then Esther George speaks tomorrow morning, but who cares as Powell is speaking at 10 AM?…

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