MARKETS IN TURMOIL

More gold from @sentimenttrader…

Short interest in S&P 500 companies jumped by almost 50 percent from July to September as U.S. stock markets entered their first correction in four years. Those positions have grown amid a volatile stock market that’s sent a gauge of companies with the most bearish wagers down almost 30 percent in five months, data compiled by Bloomberg and Goldman Sachs Group Inc. show.

The Goldman index tracking the most-shorted stocks in the Russell 3000 Index is down 7.4 percent in the first four trading sessions of 2016 to the lowest since 2009. At more than 3 percent, short interest in the S&P 500 is the highest since October 2011, when the benchmark index was recovering from a 19 percent decline.

“People on the short side are happy today,” said John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York. “There’s a very keen and vivid memory of what happened during the last market meltdown. People are anticipating that the same thing might happen again.”

Elevated short interest suggests a handful of investors could be poised to reap gains from the S&P 500’s weak start to the year. The level of short positioning in September had the potential to translate into $90 billion of stock-buying to return to average short levels, analysts at JP Morgan & Co. said said at the time.

A touch of capitulation in those names nearest and dearest, and a failed push higher here has delivered a few intraday selling extremes.

The stops are off in China tonight, and it seems everyone is selling ahead of this as it must mean that we’re heading for another nasty overnight session.

I like failed rallies like this in terms of looking for bottoming action…like we did in Late August and end of September.

Go easy out there.

While stocks try to gain some footing here off the open, Natural Gas prices are running higher (Up +5%).

$FCG has reversed too, already above its 20day average volume, after printing a fresh 52 week low.

The Chinese have decided to close their markets early today, after another -7% landslide open. I’m hoping that in order to prop up their markets, they decide to bump the stop on those circuit breakers each time the markets trade down more than -1%.

Anyway, I’m getting stretched, properly medicated, as to be ready for tomorrow’s festivities.

Sleep tight.

Yesterday stock prices here in the States did little other than mark time, and following the material selling earlier this week the fact that the best that the market could do was this is ominous indeed. We used the term “bear market” yesterday in our commentary for the first time in a very, very long while and we used it with intent, for in the past we’ve often said that we had turned “neutral” of stocks noting that in a bull market the most bearish position one can have is neutral.

This stems from our simple, but effective, notion that in a bull market there are only three positions one can and should have: Aggressively long; modestly long or neutral. But this is no longer a bull market. This is now a fully-fledged bear market and we do not say that readily, nor lightly. Nonetheless, given that our International Index made its high late last May at 11,186 and is now 1,888 points or 16.9% below that level and has been down for just over seven months, it is time to face this harsh reality.

This is a bear market. Trend lines that have held in the past are failing. Lower lows and lower highs are more and more common. Fewer and fewer stocks are trading within 2-5% of their highs and more are trading 15-20% below those highs and the Advance/Decline lines here and abroad are collectively weak and weakening.

* * *

We are, for the first time in years suggesting… indeed, we are stating it rather clearly… our belief that the global bull market that began in the spring of ’09 ended, in retrospect, in the very first days of summer of last year. We shall, henceforth, look to err bearishly of equities, holding long positions in some equities, but erring on balance to the short side of the global equity market.