The market volatility that started on January 4, 2016 has not abated, and has actually increased.  I continue to believe that the causes are an economic growth scare surrounding China and the precipitous decline in the price of oil.  I do not believe this is the start of a bear market.  Bear markets, historically, are preceded by an inverted yield curve (short-term interest rates are higher than long-term interest rates) and signs of a recession on the horizon. Right now the yield curve (basis US Treasuries) is 2 year @ 0.84% and 10 year @ 2.03% and there are no indications of a recession in the US economy.  In fact, economic data reported so far this year is supportive of improving economic growth in major developed countries (US, Europe, Japan).

However, while the fundamental picture remains positive, the technical picture in the equity markets has turned decidedly negative.  At the moment, the stock market (basis S&P500) is massively oversold but market participants are not responding to this.  The key levels I am watching are 1,867 on the S&P500, which was the low from last August and October (see chart below courtesy of RiverFront Investments), and 15,666 on the Dow Jones Industrial Average (Aug 2015 low).  If these levels are breached then I will be implementing additional risk management steps across your portfolio.

Stay tuned.

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