The stock market is off to a rocky start on Monday September 28, 2015. The catalysts this time seem to be continuing concern about the Federal Reserve interest rate policy, concern about a US government shutdown later this week, more weak economic data out of China, and a vote by the citizens of Catalan to separate from Spain.
I remain confident that, while the news is causing the wild swings, the financial markets are in a bottoming process that started with the big declines back in August. I continue to watch the 1,867 level on the S&P 500, which was the intra-day low on August 24, 2015.
Interestingly, the current bottoming process looks very similar to the declines back in 2011. That year the S&P 500 declined approximately 14% in the 3rdquarter, only to rally 12% in the 4th quarter and finish the year with no change. So far this year, the decline from the high on 5/20/15 to the low on 8/24/15 was 12.5%. (source: Yahoo Finance)
As the chart below points out, I am seeing the similar pattern of panic selling. Back in 2011 the main risk was the first Eurozone debt crisis which included countries like Portugal, Ireland, and Spain. This year the main risk is the global economy slowing down, primarily China.
For now, I remain patient to see if we get a successful retest of the low in the 1,867 area. I will keep you posted.
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