Market Still Vacillating

01/17/2014 12:01 am EST


Jim Jubak

Founder and Editor,

MoneyShow's Jim Jubak sees a market that is seesawing back and forth which, he explains, makes it vulnerable to any small news report.

For the week ahead, I think you need to watch the pattern that we've already set in place for 2014. This is a vacillation in the market between those days when everybody is optimistic about growth, especially in the US economy and the market then goes up, and days where the market is pessimistic about growth. The problem really is for the market and for investors, for even traders, there's no real trend. That's why the market is so sensitive to relatively minor news because there really is no underlying trend. There's a great amount of uncertainty, so let's take the reaction on January 15 to a return of optimism about growth that, in the days before that, the market had been slipping and sliding because there were worries that we had a bad jobs number, only 74,000 jobs created when people were expecting more like $200,000, disappointing after decent numbers from ADP about jobs, so that sort of set pessimism in place. On the 15, we had optimism return. The thing that's really important to look at here, is the kind of data that we're seeing that restores optimism. It's not very big data, it's not conclusive. The market is trendless and therefore every data point counts, so we get retail sales for December, which go up a whopping 0.2%. If you take out autos, which, autos are big items and they're kind of problematic, you had about 0.7% of growth and that's the best in ten months, and considering that economists were expecting growth of only like zero or 0.1%, this is a big positive number, so the market got kind of excited about that.

That number came out on the 14th, and on the 15th we got forecast from the World Bank that said Global Growth is going to be better than expected. It's going to be maybe like 3%, better than 3%, 3.4% in 2014. Last forecast from the World Bank was in June where they said it was going to be 3%, so you're looking at a shift from 3% to 3.4%. These are statistically significant changes that we're looking at as data that's well within all of the margins of error. These statistics, I mean, you can torture the numbers as much as you want, but a shift from 0.1% to 0.2%, or even from 0.2% to 0.4%, or from 3.4%, is really well within the margin of forecasting error, so we're really talking about people trying to torture the data because they want to see trends, so what you get is very big moves.

I mean, it's not so much just that the US market was up, the S&P (SPX) was up about a 0.5% point on the 15th on this data, but you had huge moves in Japan like 2.5% on the Nikkei (NKY), about 2% on the DAX (DAX) in Germany on this just because there's so much money washing around trying to figure out what the trend is. If the trend were more formally in place, more firmly in place, you wouldn't get these big shifts on relatively small amounts of, not terribly reliable data, but that's where we are. We're looking for a trend and therefore every data point counts, and we're going to have big moves, just volatility until we see a trend in place.

This is Jim Jubak for the Video Network.

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