Wall Street ended 2015 on a sour note. The year as a whole was pretty turbulent, but the last week of the trading year was particularly rough. The S&P 500 recorded a loss of 0.71 percent for the year. If you factor in dividends, it did end up on the year by 1.40 percent, but not all traders were able to capitalize on this because of short term exposure. This is a very neutral sounding year, but in between December 31st, 2014 and December 31, 2015, there were some violent price swings. If you look at a yearlong snapshot of Apple’s stock, for example, you would see that prices ranged between $92.00 and $134.54. It finished the year out at just over $105 per share, on the bottom part of the middle range of the year. If you just looked at the price now, you wouldn’t be able to see the wild swings in price that happened over the last 52 weeks, much like the rest of the market.
There are usually a lot of selloffs at the end of the year, so this recent action is normal, but many investors and traders had expected the year to end on a positive note thanks to the lack of traction that the year as a whole had. It was unrealistic to expect this, though. Many traders do face issues at the end of the year because it is common for technical indicators to give false symbols thanks to how money managers and institutional investors rearrange portfolios for their end of the year reports.
Many analysts believe that the main reason why the S&P 500 suffered so much this year is because of crude oil prices. The price of oil dropped severely yet again for the year, but oil is now at dangerously low prices, and this means that the companies that depend on oil for prices have been hit hard. The energy sector dropped by about 24 percent for the year, making this its worst annual performance since the recession that began back in 2008. The market pull effect, to some extent or another, has moved the negative impact from the energy sector so that it has spread to other companies outside of those that are being hit directly. Much of this is purely reactionary, and that’s a good thing for those that are looking to start the new year with lower than efficient price levels. In other words, because of unwarranted selloffs, stock prices in many areas are lower than they really should be. Buying at artificially low prices is a good thing for those that like to buy low and sell high.
For long term investors and position traders, this is a good course of action. But what about day and swing traders? In every market, prices might be low, but short term traders need to acknowledge the possibility of further drops. If you’re on the wrong side of a trade when this happens–and it will happen in many areas–you can have a good long term view of the market and still lose tons of money because of poor short term vision. Binary options traders and others that are able to safely trade effectively with both long and short positions should consider combining their technical knowledge with long term fundamental information. This will not only illuminate trends and future predictions for the markets, but it will also give you a better idea of timing. For those that trade with expiries of an hour or shorter, this is particularly important. The less time exposure you want for your trades, the heavier you should rely on the technical side of things. However, you should never discount fundamental information simply because it can take over at any time despite what technical indicators are pointing toward.