"Many headlines might say that weak manufacturing data sparked
today's sell-off, but in reality, the bears were in control in
January, and continued to press things lower again," noted
Schaeffer's Senior Technical Strategist Ryan Detrick, CMT. The
Dow Jones Industrial Average (DJI)
continued to widen its losses today, closing sharply lower and
hitting its lowest point since mid-October. "The 1,775 level on the
S&P 500 Index (SPX) had been viewed as support, but it's been
broken in a big way. Don't be a hero here. Fear is ramping up, and
this is a good sign. Still, all those levels of support that broke
could now be resistance."
Trading Topic of the Week
Continue reading for more on today's market, including
-- Reasons to Dodge Directional Risk:
Increase the odds of a winning trade
. All other things being equal, a straddle is more likely to end up
a winner than an at-the-money call or put -- the strategy boasts a
42% win rate, compared to roughly 34% for a directional play.
Dow Jones Industrial Average (DJI - 15,372.80)
swallowed its seventh triple-digit decline of the year today,
shedding 326.1 points, or 2.1%, to close at its lowest point since
Oct. 17. Just one Dow component -- Pfizer Inc. (PFE) -- managed to
gain ground, up 0.7%. Pacing the 29 losers was AT&T Inc. (T),
which dropped 4.1%.
S&P 500 Index (SPX - 1,741.89)
endured a similar drubbing, off 40.7 points, or 2.3%. Meanwhile,
Nasdaq Composite (COMP - 3,996.96)
shed 106.9 points, or 2.6%, to end south of the 4,000 level for the
first time since Dec. 12.
CBOE Volatility Index (VIX - 21.44)
zoomed higher, adding 3 points, or 16.5%. It was the fear gauge's
first close north of 20 since Oct. 8.
A Trader's Take
"Emerging markets get lots of blame for the recent weakness, but
we need to remember that Latin America has been in a bear market
for three years now," Detrick noted. "So, are U.S. markets really
down because of this now? I don't think so, but the action overseas
is definitely creating some major volatility here. Elsewhere, Japan
is officially in 'correction' mode, down 10% from its recent peak.
This gets a lot of press, but the Japanese market has always been
among the most volatile. Still, when one of the world's largest
economies has a stock market that's correcting, it isn't going to
help ongoing global jitters."
5 Items on Our Radar Today
- An unexpected
drop in manufacturing growth
sparked economic concerns and had broadly negative repercussions
on the market. The Institute for Supply Management said its
national factory activity index slipped to 51.3 in January from a
revised reading of 56.5 in December. The figure -- which was far
south of economists' expectations -- suffered at the hands of new
orders growth, which posted its worst monthly decline since
(Reuters via CNBC )
construction spending edged up
0.1% in December, propelled by strength in the private
residential sector. The reading hit its highest level since early
2009, but still fell shy of estimates.
Facebook Inc (
advanced to yet another new high, call buyers and sellers took
- Now down close to 7% so far this year,
JPMorgan Chase & Co. (JPM)
was hit with a price-target reduction before the open.
- Options speculators are placing bearish bets in anticipation
Aruba Networks, Inc.'s (ARUN)
fiscal second-quarter earnings report later this month.
For a look at today's options movers and commodities
activity, head to page 2.
Disappointing manufacturing data and continued emerging market
concerns sent crude futures lower today. March-dated oil futures
lost $1.06, or 1.1%, on the day, to rest at $96.43 per barrel.
By contrast, the same manufacturing report sparked a rush higher
in gold, as traders sought the comfort of a "safe haven"
investment. At the close, April-dated gold was up $20.10, or 1.6%,
at $1,259.90 an ounce.
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