BOB LANG: Good morning, Action Alerts Plus subscribers. It's Tuesday, January 3, 2023, our first rundown of the new year. Welcome back. And we have a lot to cover, so let's go ahead and get to it.]
So volatility remains the name of the game. And if it sounds like a repeated mantra from 2022, well, it certainly is. It's not so much that fear is related to uncertainty. Rather, we are pretty sure that interest rates are going to rise a little bit more in the early part of 2023 and remain elevated for much of the year. And a severe slowdown in the economy, perhaps even as bad as a recession, is possibly being priced in, or is it, as we're seeing a lot of volatility even on the first trading day of 2023?
We saw markets were up sharply this morning, even overnight. And now we're down close to half a percent as we do the rundown this morning. Basically, what's this all about? So stocks are being sold demonstrably each and every day. Hence, you're selling out stocks. Why do you need to add protection? So normally, we see when the VIX starts to rise, people are reaching for protection and buying put options to protect themselves against their positions that they have. But if they're selling out of those positions, why do they need to buy any protection?
So we see fear starting to make its way into the markets in the early part of 2023 right now. Now, let's remember, a year ago in 2020, the highs for the year were made on the first or two or three trading days of the year, and we kept going down from there. Of course, that was the all-time high S&P 500 close to 4,820 after the first couple of days of 2022.
Now, for the month of December, it was down sharply, close to 6%, but the VIX was only up 5%. So again, this tells us what? This tells us sellers were active in the month of December, but people were not active in trying to protect their portfolios in a way that would drive the VIX higher. It tells us also selling continues to happen regardless of the unknown. So be prepared to see a sell the rips environment, something we're already seeing today.
So at the end of the year, we are treated to some really interesting chart perspective. I like this time of year because we get to see the end of the month, the end of the quarter, the end of the week of, obviously, last week and the end of the year to see where things have finished. I'll have a bit more on that later in the day in a separate article, so look for that. But for now, the indicators are mostly mixed and are showing that the markets are contained in a wide range. Let's call it from about 3,600 up to about 4,100 to the high side. We did tag 3,900 last night when the futures opened, came back down, and then rallied back up a little above 3,900. Doesn't seem to be finding any buyers above that area so far today.
We do see oscillators are modestly oversold. The polls that I've been looking at recently, like the AAII and the Investors Intelligence, are leaning towards the bearish side. And price, of course, is still below the 200-day moving average. Now, minor moves in the markets tell us buyers are still active. Especially we saw that on the Friday dip, which nearly wiped out the strong gains from the prior day. But we did see the markets rally back and close modestly negative at the end of the year.
Once the selling subsided, dip buyers stepped in, something we did not see much of in December. If you look back in 2022, going back to the spring in March and April when the Fed started raising interest rates, we would have some really strong days, and the markets would lose it all either the following day or within a couple of days after that. So if that activity continues in 2023, it's going to be difficult to get a hold of a trend to the upside or even the downside as well.
Now, 2022 was the seventh-worst performance since the 1930s. Four of the top 12 worst performances came in the century in the 2000s. So again, just buckle up here. We're going to have some volatility to come in 2023. We know how rare it is to see back-to-back yearly losses in the stock market. But as you'll see from an article I mentioned I'm going to be posting later on today, it has happened four times over the past 100 years. So the setup is there for another down year in 2023, especially with tight market conditions and tight monetary policy. Don't be surprised if another negative year unfolds.
Now, as it relates to manufacturing, we have the PMI, the Purchasing Managers' Index, coming out today. It's an important piece of information that tells us how the economy is moving. Recently, the data portrays contraction in this area, and with the potential for job losses on the horizon. Remember, the Fed is looking for unemployment to rise in 2023 from about 3.7%, where we're at currently right now, to about 4.4% to 4.6% in 2023. These hiccups in manufacturing may linger a bit longer than expected.
So that's going to be it, everyone. Have a great day and happy new year, and we'll see you back tomorrow.