How much do the bulls have left in the tank?

Mid-week market update: Happy 2019 to everyone. The post-Christmas period started off with a bang. After bottom out on December 24, the stock market enjoyed four consecutive days of gains - until today when it was spooked overnight by a series of disappointing PMI prints.

The Caixin Manufacturing PMI fell to 49.7 from 50.2 (50.0 expected), indicating contraction. As a reminder, the Caixin PMI differs from China`s official PMI as the Caixin measures mostly the activity of smaller companies, while the official PMI measures the activity of larger SOEs.

Beijing has responded to past episodes of weakness with a stimulus program, but the stimulus announced so far has been underwhelming, as it has consisted mostly of targeted tax cuts. Anne Stevenson-Yang of J-Capital observed that China lacks the debt service ability for another round of shock-and-aw credit-driven stimulus.

The market was further hit by the news of weakness in eurozone M-PMIs, indicating deteriorating European growth. The outlook for the core European countries of France and Germany stand out as particularly problematical.

While the disappointing PMI figures put stock prices under pressure at the open, the bulls must have been encouraged by the intra-day recovery to see the market close only slightly negative on the day.

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A Special Announcement
We told you so. We told you the market was going down.

Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).

We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).

The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.

The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.

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