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Last week’s market meltdown could be a buy signal

Marketwatch article by Barbara Kollmeyer

The year is clearly off to an inglorious start. It’s been the worst four-day start for the S&P 500 literally since the invention of sliced bread.

But as the week groans to an end, some signs of calm are surfacing. In China, authorities removed the circuit-breaker candy and markets didn’t panic, making way for U.S. stock futures to rip higher. At least for now.

We’re hours away from tallying up the official first week of trade, but some say the first five days reveal the market’s direction for the whole year. Here’s a flashback to 2012 when Mark Hulbert called the five-day indicator a bunch of hooey. In 2015, the S&P 500 finished down 0.7% after dropping 1.6% in its first four days of trading. And in 2014, the market ripped up 11% even after a 0.6% drop at the start of the year. Early days indeed.

But you don’t have to travel far to find those who think the market overreacted to a known factor this week. “China has been slowing for over a year, and no one believes the overly optimistic economic growth numbers the Communist government is putting out. If China weakness was going to take us down, it would have happened by now,” says CrackedMarket’s Jani Ziedins.

Ziedins expects today’s payrolls data to prove all this hand-wringing over China and oil matter less when the U.S. economy is chugging along just fine. Yes, U.S. jobs data, lost in the China smog of this week. And it just came in better than forecast, along with an October upward revision.

On to our call of the day. A fresh survey from Bank of America Merrill Lynch says yesterday’s shenanigans have helped create a contrarian buy signal.

Source:  http://www.marketwatch.com/

Posted by:  The Wealthy Doctor

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Last week’s market meltdown could be a buy signal - overview

Summary: The year is clearly off to an inglorious start. It’s been the worst four-day start for the S&P 500 literally since the invention of sliced bread. But as the week groans to an end, some signs of calm are surfacing. In China, authorities removed the circuit-breaker candy and markets didn’t panic, making way for U.S. stock futures to rip higher. At least for now.

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