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NYSE trader: Why the bears are in control in 2016

By Keith Bliss, Cuttone & Co.

After coming off of the worst January since 2009, we start the first week of February bracing for a raft of data and information to disseminate. Nearly 100 companies in the S&P 500 will report earnings this week, and the amount of macroeconomic data out of the U.S. and elsewhere will be almost overwhelming. Traders will have a lot new information coming at them as they try to dissect where the markets will go based on overhanging issues such as China, crude oil, and global central bank policy.

Now that financials and energy are essentially done, we will get a nice cross section of earnings this week from companies like Alphabet (GOOGL), Chipotle (CMG), Yahoo (YHOO), Yum Brands (YUM), and LinkedIn (LNKD). Certainly, earnings reports and company guidance are important. However, more attention likely will be paid to the macro data and how the various central banks respond. This notion is even more essential to market analysis now that the Bank of Japan was the latest to go “less than zero” with its excess reserve deposit facility last Friday. Data to keep an eye on this week will be personal consumption, core PCE, ISM Manufacturing PMI for January, ISM Non-Manufacturing PMI for January, labor costs, productivity, and, of course, nonfarm payrolls on Friday.

This is a lot to digest, but I still wonder if it really matters to the market in the short term because China, crude oil, and the equity markets are still inextricably linked in a way that I’ve never seen before. Until that tight correlation fades, we will take in the earnings, data, and other factors and file them away as part of the grand mosaic of analysis. For right now, oil and all that it means, is riding herd over the market.

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The end of trading in December 2015 was instructive for how 2016 would open. That surprising weakness really did signal the bad times to come (if you are a bull). In like fashion, the market action in January is usually instructive for the remainder of the year. Historically, as goes January, so goes the market for the year.  It does not always turn out that way, but over the last 10 years, that condition occurred in 70% of  cases. As percentages go, that's a very strong pattern. I don’t usually bet against historical percentages that strong, and that’s especially true this year given the potential headwinds on the horizon.