Market Volatility Isn't Over, Expert Warns

January 22, 2016

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Market Volatility Isn't Over, Expert Warns

A late-week rally may have tempered tensions, but according to JJ Kinahan, the market volatility is not over.

Speaking Friday morning on Benzinga's PreMarket Prep, Kinahan said he was hopeful we could return to more normalized trading in a couple of weeks. "I don't think the volatility has ended," he said. "It usually doesn’t end on a dime."

Reassessing Financials

Kinahan, TDAmeritrade's chief strategist, said the issue is company valuation, and "what people thought the valuation for many companies should be is kind of being shaken right now.

This is particularly true in the financials sector, with Kinahan noting that of the 14 financial stocks in the S&P 500, 11 beat earnings this quarter.

"I think the valuations in the financials are being reassesssed right now because we're not sure how many rate raises we're going to get," he said. "I think many people when they evaluated those stocks had at least built in thee for 2016. Well if that's only one, that affects the spread margins in a negative fashion, which would affect the stock price in a negative fashion."

How To Trade In This Environment

During this period of extreme volatility, Kinahan advised not to hunt for extremes when looking at a stock.

"Wait for a trend. You don't have to get the bottom tick. You don't have to get the top tick on anything."

This is especially applicable to oil, with Kinahan advising anyone who doesn't normally trade the commodity to stay away.

"If you're not somebody who's normally trading crude oil, now is probably not the time to get into it," he said. "When the people who trade it on a daily basis are having trouble because it's so volatile, it's not the time for you to say 'Hey I know whats going on in there.'"

Catch the full interview with JJ after the first break in the clip below, and listen to PreMarket Prep live every morning here, or listen to the podcast anytime here.