‘The stage before criticality’ – might best describe what’s going on in markets. During a majority of 2015 we technically described it as distribution, evidenced by lower breadth on most rallies versus declines; bounces led by most-shorted, and earlier by often-broken high-beta momo (momentum) stocks of the era; as at no point was there an attractive investment grade opportunity provided.
There have been alternating trading opportunities for Bears and Bulls alike; but the point of the sharp rebounds faltering (often in recent months around 2100 of S&P), is that traders had to be nimble, by prefer ‘fading’ the rallies than ‘buying’ dips, as a primary focus. If one’s investment horizon was no more than days or weeks, then yes some long-side plays were doable, but mostly failed quickly in the case of the ‘perceived’ safe areas for longs (hence poor fund performances for the entire year by both hedge and many mutual funds).
Throughout the year we provided charts to emphasize the deteriorating internal market condition, as well as deteriorating prospects for economic recovery. Of course the latter is why we didn’t argue negativity for the sake of being bearish; but because it was pretty obvious most institutional and quasi-governmental or ‘independent’ central bank forecasts were excessively optimistic. We projected they would be ratcheted lower; and inevitably virtually all have been.
