Market Lab Report - Premarket Pulse 1/22/16

Published : January 22 2016 at 8:33 ET

Major averages rose tepidly yesterday on lower volume, finishing roughly midbar. While contrarian arguments suggest a bounce as the put-call ratio has spiked and bearish advisors outnumber bullish ones, defensive stock industry groups have shown strength while the small cap Russell 2000 continues to show weakness, a sign of a risk-off market.

Timing a bottom in an unhealthy environment is like trying to catch a falling knife, as the saying goes. We are in such an environment. Thus the timing models are quick to test the waters and quick to reverse back to cash in this period of elevated volatility.

The market remains caught in a gap-up, gap-down news driven situation. Indeed, futures are up around 2% at the time of this writing as oil prices bounce more than 5%. The media is saying the bounce in oil is due to the stance the ECB took yesterday at 8:30 am EST on the possibility of additional monetary easing when they next meet in March. Of course, the media will always try to find a reason for any big move in the market but begs the question why, after the ECB suggested additional easing, the market was unable to sustain its stronger bounce in yesterday's trade.

Perhaps institutions are as confused as ever, thus uncertainty reigns making for more rip-tides in this environment of elevated volatility.

Sometimes the sidelines are the best place to be until the smoke clears.

Over in Japan, the Nikkei got a boost after an aide to Prime Minister Shinzo Abe said Thursday that “conditions for additional easing have fallen into place." The Bank of Japan will meet on Jan. 28-29, and some expect the central bank’s asset-purchasing program could be increased. 

This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.