EOT Position Update – January 6, 2016

| January 6, 2016

Market Snapshot

Happy New Year!

Sort of…

The Santa Claus rally didn’t deliver in 2015.  Now financial markets around the globe find themselves in a post-holiday hangover.  Markets from China to Europe and here in the US have all sold off in the first few days of 2016.

Hopefully, 2016 is a better year than the forgettable 2015 for US stocks. But it’s looking like 2016 could be even worse than 2015.

The S&P 500 finished 2015 with a loss.  It wasn’t a big loss… but anytime stocks are flat for an entire year, the lost opportunity is damaging to investors.

And right now, it looks like things are going to get worse before they get better.

Simply put, the S&P 500 is in a downtrend.

S&P 500

Stocks peaked midway through 2015.  They sold off dramatically in August.  Then they staged a dramatic rebound in October.  And in November and December they have set a series of lower highs and lower lows.

The path of least resistance for US stocks is down.

The MACD and RSI have reached levels that are indicative of an oversold market.  We’ll likely see stocks rebound in the very short term.  But they won’t break out of the downward trending price channel and will most likely continue moving lower.

Don’t forget, the market has been led by a few mega-cap stocks while the vast majority of stocks are down or stuck in a rut.  The lack of breadth is one indication that stocks are about to move lower.

Investors are also focused on the Fed.  They continue to signal they’ll raise rates to pump the brakes on an improving US economy and the threat of inflation.

The strengthening US Dollar continues to be a major headwind for commodity prices, emerging markets, and companies that do a lot of business overseas.

What’s more, China continues to be a thorn in the side of the global economy.  Slowing economic activity and stock market turmoil could send China down the tubes if the government doesn’t continue to be a buyer of last resort.

Now, onto the updates…

Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  We try to focus on the positions that have some significant news or price movement.

IPHI January 15th 2016 $30 Calls

IPHI was poised for a bounce if the Santa Claus Rally delivered this year.  But the rally didn’t materialize.  Now stock markets around the globe are selling off.  This cheap option on IPHI could still bounce back.  IPHI is still in the uptrend. And the markets are poised to rebound from oversold levels.  Continue holding.  Support is at $100.00 and $99.00.  Resistance is at $110.00 and $115.00.

FB January 15th 2016 $110 Calls

FB and the vast majority of US stocks have been in a downtrend since November.  The bullish momentum for US stocks is gone.  Sell this option if you can to recoup some of your capital.

Category: EOT Update

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