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The markets are down hard – and oil is taking much of the blame again. There is speculation that sanctions against Iran will be lifted this weekend. Expectations of more oil coming on-line, in an already oversupplied market, is driving the price of oil lower. Oil prices broke below $30, a key psychological support level. The price of oil has fallen 20 per cent so far in 2016.

It has been an historic start to the year, with equity markets tumbling globally, and many indexes having the worst start to a new year in history, approaching or already in bear-market territory.

We are in a trading environment characterized by rallies and retreats, as there are just too many unknowns and areas of concern. So what's causing the volatility? Today, it is oil, but there are other major macro headwinds. There is the devaluation of the Chinese yuan, the continued economic slowdown in China, expectations of corporate earnings disappointments and cautious outlooks, an oversupplied metals market, the U.S. Federal Reserve raising interest rates while other central banks across the globe are lowering interest rates, negative investor sentiment with page one headlines in major newspapers of a global economic slowdown, geopolitical tensions, negative market momentum, and even fears of a recession.

There is evidence of weakness in global trade fueling global growth concerns. The Baltic Dry Index, an indicator of global trade and the health of the global economy, is at an all-time low. On Tuesday, CSX, a major U.S. railway operator, reported fourth-quarter earnings after the close and warned that earnings would decline in 2016 given, "Negative global and industrial market trends projected for 2016."  This negative sentiment was echoed by the president and chief executive office at FedEx, the world's largest freight cargo carrier last month.

Many investors are being forced to sell. Institutional money managers have fund redemptions to deal with fund outflows, forcing managers to raise money. Algorithms trading is automatically generating sell program. Margins calls are forcing retail investors to liquidate positions. Compounding the problem is that we are heading into a three-day U.S. holiday weekend, traders do not want to be long the market over a three-day weekend.

Is the pain over? Not likely. Generally, oil and the equity markets move in-line, and until we see the price of oil stabilize, for longer than a day, the markets may make lower lows.

The U.S. consumer, the engine for economic growth, with consumer spending representing more than two-thirds of U.S. gross domestic product, appears to be saving and focused on reducing debt, rather than spending. In 2015, retail sales grew 2.1 per cent, its lowest level since 2009, down from 3.9 per cent in 2014.  Today, Walmart announced plans to close 269 stores worldwide, of which 154 stores are located in the U.S.  On Thursday, Sharon McCollam, the chief financial officer forecast a decline in fourth-quarter domestic revenue of approximately 1.5 per cent, due to weak demand in mobile phones.

We have yet to see capitulation, when fear spikes. The VIX index, a volatility index that is often referred to as a fear gauge, is elevated at 27, but is not at alarmingly high levels. For instance, in August 2015, it spiked to over 40. On Thursday, the markets climbed higher. The S&P 500 index posted its strongest one-day percentage gain since Dec. 4. This is not capitulation. Investors have yet to throw in the towel.

Meanwhile, there a few pillars of strength for investors to invest in within equity markets as we are experiencing a broad market sell-off. Consequently, investors are seeking safe havens outside of the equity markets. Bonds are getting a bid. The U.S. 10-year treasury yield briefly dipped back below 2 per cent today.

The bottom line: fundamental buyers are not willing to step into these markets. Investors are seeking preservation, not bargain hunting. This weakness, while painful, will present buying opportunities for investors to buy fundamentally strong companies. However, there are more hurdles to overcome. On Monday evening, Chinese fourth-quarter gross domestic product will be released, which could create further market volatility.

The erratic market activity feels far from over.

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