After a strong close yesterday and overnight strength in many foreign markets, it was shaping up in the pre-market this am to be a strong opening. That’s exactly what we got, but the trade of the day was to short anything on the opening because that was the high of the day. The rest of the day was steady selling nearly all day, with the exception of a relatively weak attempt at a bounce around 2:15 that was quickly snuffed out within 15 min. Nothing was spared today. The financials, which had kind of held their own early, finally succumbed to the late selling pressure although the BKX managed to close even. The brokers and exchanges all got hit hard today, but then so did most everything else. Oils, oil servicers and anything else energy related, including coals and solar, were all under extreme pressure today as fears continue to mount that we’re nowhere close to the end of global slowdown and according to some well followed economists, we’re only in the 4th inning. Even tech stocks, which have been relatively strong recently, were under the gun today with nearly all being down in the 5% range for the day. For GOOG that equated into a 16+ point loss. In other markets, the dollar staged a strong rally starting about midnight last night against nearly every major currency and gold eased off slightly today. The biggest bull market in the world right now is in gold coins which are in short supply worldwide as those with the capital seek safe ports.
The net result is that with a 27 point drop in the S&P 500 today we’re sitting right at the low of the past 12 years made back in October 2002. For long term investors they’re back where they started 12 years ago in 1997, as you can see in the chart above. I hate to even consider that return when you factor in the inflation factor for the past 12 years. As you can see on the chart the next support cluster comes in at the 685ish level on the S&P though there is a little support where we are now from late 97 and the intraday lows from November. We are still in a primary down trend. However we are starting to get some indicators into the oversold position and if you look at the market historically you rarely have the kind of drops, see chart, especially from the 1300 level to here, compared to the 2001-2003 period, when there were several periods of nice rebounds. We haven’t had one, so as I stated last night, I think we’re entering that territory where we could see a reversal, which could be somewhat violent. I try not to get caught standing in front freight trains and trying to pick bottoms, however if you’re short you may want to be alert.