Testing… Testing

By Jim Dondero | August 31, 2015

  • US Stocks had another extremely volatile week, and August 2015 will be remembered as one of the worst to investors in many years. More important than the declines themselves is that several market averages have decisively broken key areas of support, and are now putting in a pattern of “lower highs” and “lower lows.”
  • As we also noted last week, markets typically need time to heal and repair after such quick, violent moves, and we are expecting any initial low to be tested before stocks mount their next meaningful advance. Key in the testing process will be whether (or not) market internals and the stress in the credit market improves.
  • A major driver of the volatility globally has of course been China, and we continue to believe their instability will push the Chinese government to take additional, dramatic actions in an attempt to steady their markets.
  • Finally, the recent bounce in crude oil prices may also prove to be a stabilizing factor for the markets. While that remains to be seen, firming crude could indeed help relieve the market’s worry surrounding Energy MLP investments, which we believe to possibly be offering an historic opportunity here.

 

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