Stocks were pummeled again yesterday, as the Dow Jones
Industrial Average fell 5.5% and the S&P 500 lost 6.66% in an
avalanche of programmed selling. Volume shot to its highest level
in two years on the NYSE as 2.5 billion shares traded with
decliners outnumbering advancers by 16-to-1. Gold futures soared to
a new high of $1,710.20 as investors tried to find haven against
the hurricane of sell orders. But strangely one of the reasons for
the market's sell-off was supposed to be the downgrading by S&P
ofU.S.debt, and yet Treasury bonds were winners with the 10-year
yield falling 0.2 percentage points.
The big increase in volume, which was more than double the
average volume of the year, was attributed by the financial press
to hedge funds and institutional accounts throwing blocks of stock
into the market without regard to price, quality or outlook. And
there was talk of the "flash crash" and even the possibility of
another crash like 2008, as the Russell 2000 index of small caps
was hit with an 8.9% decline. Banks were especially hard hit with
Bank of America
(NYSE:
BAC
) plunging 20% and
Citigroup
(NYSE:
C
) down over 16%.
Yesterday's plunge pierced the minimum target of 1,143 on the
S&P 500 that resulted from last week's neckline break. In just
a day, the broad-based index even fell into last summer's trading
range of 1,040 to 1,130 that we discussed as a possible downside
support zone.
But with the VIX closing at 48, its high of the day, which
surpasses last April's closing high by several points, there is no
evidence of any meaningful buying, and so the near-term direction
is lower.
A number of interest is the low of last year at 1,011, and just
above that the number 1,018, which represents a 50% retracement of
the entire bull market from its March 2009 low to the recent high.
With little else to go on and a 50% Fibonacci number at the bottom
of last summer's trading zone, that zone is still our most logical
area from which a consolidation could begin.
Today's Trading Landscape
To see a list of the companies reporting earnings today,
click here
.
For a list of this week's economic reports due out,
click here
.
See Serge Berger's Daily Market Outlook:
Relief Rally Could Provide Bulls a Quick Trade
See Sam Collins' Trade of the Day:
A 9% Dividend to Help Ease the Market Pain
See Serge Berger's Trade of the Day:
One Sector Worth Going Long
