Market Commentary, 05/09/16
Stocks recorded their second week of losses, although a rally on Friday limited the declines. The Dow closed today at 17,705.91, which is down over 390 points (-2.2%) from the recent April 20 high. The S&P closed the day at 2,058.69, for a decline of 2.08% from the same April 20 high.
In U.S. economic news, the U.S. economy added a weaker-than-expected 160,000 jobs in April, the smallest gain since September. In a separate report from payroll processor ADP, private sector employers added 156,000 jobs last month – the smallest ADP gain in 2 years. Both the Labor Department’s and ADP’s reports missed analyst expectations widely.
These weak economic reports and potential interest rate increases in conjunction with the upcoming Presidential Election could create a very uncertain market. We will continue to monitor market movement by utilizing our momentum indicator. This indicator consists of seven ratios designed to reveal the relationship of supply and demand.
For example, one ratio compares higher volume days – which represents more demand – to lower volume days – a reflection of lower demand. Another ratio makes a comparison of new 52 week highs versus new 52 week lows. A third ratio compares the number of stocks that are moving up (advancers) versus those that are moving down (decliners). These ratios are then weighted and combined into a single indicator.
When in a bull market, a dip below a predetermined level signals a bear market. This level was breached and a bear market was triggered in mid-January, well before the 2/11/16 low on the Dow of 15,660. Since then the market has climbed on average volume and increased volatility – which has resulted in a minimal change in momentum. This lack of momentum keeps us firmly in a bear market. We will continue our defensive posture until the momentum indicator exceeds the level that triggers a confirmed bull market.
Wayne Copelin, CFP®
President, Copelin Financial Advisors, Inc.
514 Brooks Street
Sugar Land, TX 77478
Phone (281) 240-2902
Fax: (281) 240-2856
Securities offered through ProEquities, Inc., a Registered Broker-Dealer and Member FINRA & SIPC Advisory Services offered through Harvest Investment Services, LLC., a Registered Investment Advisor Copelin Financial Advisors, Inc and Harvest Investment Services, LLC are independent of ProEquities, Inc.