January Review, February 2015 Preview

What a great start to the year – two new training centres!

This one in KL in Solaris Mont Kiara and …

KL

… this one in Cuppage Centre in Singapore.

SG

On Friday 16 January, we had our first Gathering at our new place and it was a full house.

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Then on Saturday 17 January, I was a keynote speaker at the SIM Investing & Networking Club’s Third Youth Financial Symposium. This was my second appreance since their first one in 2013.

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And on the last day of January, I became the biggest crowd puller at ShareInvestor’s Investor Carnival at Singapore Expo.

SIic

Not a bad way to start the new year. Can’t say the same for the market though …

MARKET MATTERS

January 2015 was a wild ride. Crude oil took a further beating in January, falling to $44 for a 7 month rout totalling -58.9% from $107 in June 2014. Copper continued its 4-year slide to 2.47. Like the year before, the first month of the year ended in the red, prompting the belief that the year is likely to finish to the downside as suggested by the January Barometer.

DOW

Let’s recap some of those foreboding prophecies we mentioned last month … no sell-off in May 2014, terrible Black Friday numbers and now, no Santa Claus Rally … the updates from January are that the first day was down, the second day was also down (which is extremely rare), the first five days didn’t give us a gain and the January Barometer is bearish – all signs that 2015 is likely to be more bearish than bullish. The last time we had these prophecies all lined up perfectly was in January of 2006 and January of 2007.

Other signs that the economy has waned and that the market could well capitulate are in the VIX and Bond Yields.

Yields

Yields have fallen to multi-year lows. The 30yr yield is only 25bps above 2% when it is normally above 4%. The spread between the 5yr and 10yr is only 50bps – won’t take much to inverted that pair from here. From this range, it won’t take very much to invert any part of the yield curve.

Remember that almost every major market collapse was preceded by an inverted yield curve.

VIX

The VIX closed out the month of January at 20.97, above all its major moving averages. Keep a close eye on this for hints that the big boys may be hedging ahead of a major downturn.

There and good reasons for this happening. With all the apparent weaknesses in Europe, the Swiss surprise, Japan’s on-going woes, slowing growth in China, multi-year lows on oil and copper, everything seems to obviously point at a global recession in the making. We haven’t even considered that earnings in the U.S. have been far from stellar and we are not even halfway through earnings season.

On Friday 30 January, the U.S. announced that its growth has slowed considerably from 5.0% recorded in the July-September period to 2.6% in the fourth quarter of 2014. This could be the straw that breaks the camel’s back.

Whether this is just earning season’s irrational cycle or truly global weakness that will send us into the next crash, what is obvious is that we should be cautious over the next few months and watch for the warning signs.

FEBRUARY PREVIEW

February 2015 is the shortest trading month of the year with only 19 trading sessions and a public holiday. February usually opens well but finishes poorly.

February is the worst of the three months in quarter one and tends to be flat-to-bearish in most years past. The month is also known as “the weakest link” in the best six month on the DOW and S&P between November and April.

February Trivia

Commodities

SUMMARY

Things are going from rough to tough and I am expecting it to worsen considerably. There are just too many hawkish things to ignore and hardly any reason to be bullish. So be safe and don’t take unnecessary risks if you don’t have to.

The Pattern Trader Tools Team would like to wish all our readers and subscribers a very Happy Lunar New Year & a Profitable Year Of The Goat in 2015.

Trade Safe & Happy Hunting Always!

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