If folks were looking for stock market volatility heading into 2016, they will not be disappointed. This trading week has provided some of the best volatility in a long time.
The DJIA finished the with a 139 point loss after being higher at mid-week by 483 points. The DJIA finished Friday with a 370 point loss to close at 17,128 while the S&P 500 lost 36 to close at 2005.52. The Nasdaq was lower by 79 points to close at 4,923 and the Russell 2000 lost 14 points to close at 1,121.
So, what happened to the stock market since the Federal Reserve interest rate increase on Wednesday?
The Federal Reserve increased interest rates within a slowing economy and a powerful global deflationary environment. Just today, the December Service Sector Purchasing Managers Index (PMI) crashed to 53.7, its lowest level of the year. This was on top of U.S. Industrial Production which fell 0.6% in November, the third consecutive monthly decline and the largest drop since 2012. In addition, the November PMI Manufacturing Index unexpectedly fell to 51.3, its lowest level in more than three years, with new orders weakest in more than six years.
And, with the Federal Reserve raising interest rates, is not the Barclays 20+ Year Treasury Bond Fund (TLT) - Get Report supposed to be falling in price? The fact that it is rising in price and rates are falling is classic deflation.
Janet Yellen and the Federal Reserve have made a major policy blunder as we head into 2016. Look for a recession sooner rather than later in 2016.
The Dow Jones Transportation Average has also crashed to a 20-month low, proving the market weakness is not all about oil. This U.S. economy has been slowing and will continue to slow into 2016.
In the meantime, stocks such as Apple have broken down and now have a bearish trend. Attached is the daily chart of Apple, clearly showing the risk range break to the downside.
The stock market will be setting up for a bounce higher as we head into the Christmas holiday. It is anyone's guess, however, how the market opens on Monday. Stay defensive.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.