Happy New Year 2016!

I'd like to wish all of my readers, the hosts of all the websites who publish my articles, and those who generously provide a link from their trading Blog to mine, a very safe and Happy New Year 2016! May all your dreams come true...

Market Forecast for 2016: Debt Bubbles and Volatility

As a contributing writer at Investing.com, I'm pleased to announce that they invited me, once again, to participate and share my views on where the markets may be headed for 2016. FYI, you can read what I wrote a year ago, as to what I projected for 2015, here.

I wrote the following article on December 7th: Market Forecast for 2016 -- Debt Bubbles and Volatility. It was published on their website on December 29th and may now be read at this link.

I'd also like to take this opportunity to thank the good folks at Investing.com for this invitation and for publishing my articles for past few years...it's been a privilege!

Good luck to all next year!

* For your easy reference, I've re-printed my article (originally written on December 7th), as follows...

What would cause retail and proprietary trading banks to tighten lending and begin to call in their loans?...possibly a major "accidental international incident" in the (internationally-crowded) Middle East, involving Russia and the West/Europe and/or Middle-Eastern countries? In such a scenario, we may see the price of Oil and Gold spike, contrasting with a major world-wide sell-off in bank stocks, in particular, along with equity stocks, in general. The markets in the U.S. could be especially hit hard, inasmuch as 68.4% of its GDP was comprised of personal consumption expenditures in Q3 of 2015 (it has averaged around 68% since 2008). The question becomes, would banks pass a stress test under those circumstances?

Until then, I think we'll see world Central Bankers continue to inflate equity markets and influence currencies by keeping interest rates low (or relatively low), thereby keeping Oil and Gold prices depressed -- which, then, keeps inflation low -- which, in their minds, could serve to validate their reasons for maintaining low interest rates and/or some form(s) of Quantitative Easing -- perpetuating this never-ending cycle of low economic growth, in which we seem to be stuck and, which, world governments seem to be incapable of, or unwilling to, address.

The question, then, becomes how much could markets advance next year, if a major international incident did not occur? Possibly around 5-6% -- a bit higher than this year's increase, which peaked (as of today's writing of this article...December 7th) at its (daily closing) high of 3.49% on May 21st -- in a potential run-up to the U.S. presidential election to be held on November 8th.

In that case, I'd keep an eye on the Technology Sector and Cyclicals to continue to outperform other sectors in the U.S. and to see if the Financials Sector begins to, substantially, firm up, along with the Industrials Sector. Otherwise, we may only see a repeat of 2015 and achieve around a 4% increase, or less, for 2016. Here's how they've performed, so far this year, as shown on the following Year-to-Date graph of the 9 Major Sectors...

Regarding the Financials Sector, the following three Daily ratio charts are worth noting...they show the strength/weakness of the:

• XLF (U.S. Financials ETF) compared to $SPX
• EUFN (European Financials ETF) compared to $STOX50
• GXC (Chinese Financials ETF) compared to $SSEC

Each chart shows that price is trading at or near major price resistance and their converging 50 and 200 MAs, and that all of these financial sectors are currently weaker than their country's counterpart Major Index...the last two at a considerable discount. Unless we see all three of these firm up and outpace their major indices, I doubt we'll see that 5-6% potential target increase achieved in U.S. equities.

In any event, as mentioned in my post of December 3rd, I'll re-iterate that, "I think 2016 will see greater volatility and much larger swings than we've seen this year." My comments and chart contained therein still apply (and are worth monitoring, along with the above charts and graph, over the coming weeks and months) regarding major resistance and support levels on the SPX:VIX ratio and equity market follow-through.

Coping With Losses -- In Life and In Trading (REPOST)

SB's note: I originally wrote this post on February 24, 2013, but thought I'd share it again as we approach the end of 2015...and to wish a Happy Holidays to all...

Markets Bottoming or Simply Short Covering?

Markets that have rallied the most (within their respective groups) on a percentage basis this past week (showing percentage-gained above the zero level, as opposed to most of them being in the percentage-lost category, on a Year-to-Date basis):

Dow Utilities
Portugal
Greece
EEM (Emerging Markets ETF)
China's Shanghai Index
Canada's TSX Index
Austrailia's AORD Index
Platinum
Oil
Silver
Lumber
U.S. $
Blackberry

So, the questions is, is this a serious attempt to bottom out, or simply some short-covering before the end of the year? Their performance next year may hold the key to overall global strength or weakness...particularly, Oil, the U.S. $, Emerging Markets, and China.

What's in Store for AAPL?

$95.00 or $85.00 target?...both are major support levels, as shown on the Weekly chart below.

So far, price has been unable to break above major resistance (with volatility increasing within a broadening triangle formation), so it suggests that a top may be forming with further downside to follow.

Further Downside Likely for Foreign ETFs

One gauge of market sentiment that I look at from time to time is my chartgrid of Foreign ETFs, showing the daily ATR on each ETF (the white histogram at the bottom of each ETF)...an extreme high ATR can often signal capitulation and a reversal of recent general trend.

From the chartgrid below, we're not seeing that extreme, yet. In my opinion, we could very well see further downside on these ETFs, in general, for awhile longer.

Is Oil Set to Bounce?

The following 5-Year Daily chart depicts Light Crude Oil (as the primary instrument in candle format) and the S&P 500 Index (as the secondary instrument shown as a black line). There was a drastic shift in sentiment between these two markets when they began to diverge in mid-October, 2014.

While the price of Oil is making lower swing lows in its depressed downtrend -- and, in fact, made a new 5-year low today (December 7th) -- the RSI and PMO indicators have been making higher swing lows but have yet to make higher swing highs. So, while we're seeing possible hints of higher prices to come at some point in the future, it may be awhile yet before prices begin to stabilize, first.

High-than-normal volumes this year haven't yet produced stable prices and may have contributed to the large swings in between 37.50 and 62.50 that we've been seeing. Until we see a sustained drop in volumes, we will likely see Oil continue to plunge to further new lows and/or persist in its wild daily erratic bearish and bullish spikes.

2015 Market Volatility is About to Get Wilder for 2016

I can't get too excited about possible market follow-through in any one direction on the S&P 500 Index unless and until price breaks and holds either above 150 or below 100 on the SPX:VIX Daily ratio chart below.

Currently, price is still in what I call the "Major Conflict Zone." Yes, I realize it's a huge range, but that's the way 2015 has gone. In my opinion, I think 2016 will see greater volatility and much larger swings than we've seen this year...hang onto your (Santa) hats, folks!

Is Europe Really the Loser for 2015?

At 7:45 am ET on Thursday, December 3rd, markets will know what the ECB will do with its interest rates until its next meeting in 2016. Mario Draghi will give a press conference at 8:30 am ET to explain the details.

Based on the Year-to-Date graph below, which shows how Europe's Major Indices have fared compared with U.S. Major Indices in 2015, I'd wonder why the ECB would think that it has to pour on more QE stimulus, as many media pundits are predicting...we'll see what happens.

China's Shanghai Index: A Bounce Next is Critical for Bulls

Further to my post of November 17th, a bounce next (at the 40 MA...3433) and sustained rally to new highs, thereafter, is critical for China's Shanghai Index.

Otherwise,  a break and hold below the 40 MA will signal that the bearish scenario (that I outlined in the above post) is imminent, in my opinion...all three indicators on the Daily chart below of SSEC  now display "SELL" signals.

Political Unity...An Oxymoron

Some things never change...I wonder if they ever will? Case in point, my post of November 7th, 2012...still seems relevant today, except the U.S. National Debt has now reached $18.6 Trillion and there are even deeper differences, not only between Democrats and Republicans, but also within these parties (on issues such as the refugee crisis, as one example).

I repeat:

"The war between its own political parties is a greater threat to America 

than any threat from its enemies."

I've stopped hoping and am simply waiting to see action now...but am not holding my breath on this...perhaps the next generation will figure things out if ours isn't smart enough to do so...some legacy, eh?

Third Major Leg Down Ahead For Shanghai Index?

You can see my original post of July 8th and four subsequent updates covering China's Shanghai Index here for background information.

In my last update of September 8th, I noted that a bearish moving average Death Cross had formed on the Daily chart and price closed at 3170.45. Since that date, price moved sideways for over a month before it, finally, rallied to where it closed today (Tuesday) at 3604.80.

I have the following observations on the 2-year Daily chart below:

• both gaps down in August have now been filled
• a bearish Head & Shoulders has formed on the MACD Histogram, hinting of weakness ahead
• price is approaching a triple confluence major resistance level around 3750 (comprised of the 200 MA, major downtrend line, and a 40% Fibonacci retracement level)
• a re-test of a 200 MA is not uncommon after a Death Cross has formed and price usually drops  afterwards, often to new lows

I wouldn't be surprised to see some major selling come in sometime soon on this index to, possibly, take price down to around 2500, or lower (what would be Wave 5 for Elliott Wave enthusiasts).

S&P 500 Index: Naughty or Nice?

The Momentum indicator has crossed below the zero level on the following Monthly chart of the S&P 500 Index (SPX), hinting of further weakness ahead.

Major support sits around the 1700 level (confluence of the  50 MA and the 40% Fibonacci retracement level -- taken from the October 2011 lows).

Price on the following Monthly ratio chart of the SPX:VIX rallied at the end of today (Friday) to close just above the 100 level -- which is a major bull/bear line-in-the-sand level -- and, about which, I've written in numerous posts here.

The Momentum indicator is still well below the zero level, also hinting of further weakness ahead for the SPX.

Price on the following Daily chart of the World Market Index did eventually drop to re-test the 1600 level, which was mentioned as a possibility in my above-referenced posts. It, subsequently, bounced and has now fallen back and closed below what was near-term major price support (now major resistance) at 1700 and the 200 MA.

Unless we see price rally and the RSI climb back (and stay) above the 50 level, we could very well see this Index plunge back to 1600, or lower. As of now, all three indicators on this chart contain "SELL" signals...and, in fact, the RSI has now broken its recent uptrend, which, also, suggests further weakness to follow.

Unless we see major buying step in soon for the SPX and the World Market Index, equity markets may very well be in for a lump of coal for Xmas -- and, my 2015 Market Forecast may prove to be fairly accurate -- as of today, there are only six weeks until then.

These three charts should provide clues as to any strengthening or continued weakness in the coming days/weeks.

"World Population Aging: Clocks Illustrate Growth in Population Under Age 5 and Over Age 65"

Wonder no more as to why global economic conditions are slowing down...this article, courtesy of
Carl Haub of the Population Reference Bureau, offers an excellent explanation [which re-enforces what I've previously said about Baby Boomers (downsizing) here and here]...

"World Population Aging: Clocks Illustrate Growth in Population Under Age 5 and Over Age 65"

I think the U.S. Fed's mandate to tie a 2% inflation target to their timing of a rise in interest rates is outdated and too high and needs to be seriously re-visited, in view of these facts.