Monday, March 2, 2009

End of Day 3/2

Of course it’s not the end of the world, it just felt like the end if you own stocks!

For the day the DOW lost 299 points or 4.2%, the S&P gave up 4.7%, the NDX lost 3.6%, and the RUT fell to pieces giving up 5.5% on the day. Notably the Transports crashed through support losing 6.7%, while the XLF coughed up another 6.3%, and IYR choked on a 7% loss propelling SRS up 14.5% on the day.

Gold got nailed pretty good for a 1.8% loss, closing below the old breakout level – this is exactly why I’ve been cautious to jump on gold here. Maybe jump on again at the 50dma…

The internals were truly bad, with declining NYSE issues 15 to 1 over advancers, 97% of the volume on the downside, and 627 new lows. Normally internals like that require a pause at a minimum. I note that this is the third 95%+ down volume days in the past two weeks.

Since the second week in January, the S&P went from more than 940 all the way down to 700. That’s more than a 25% loss in less than the past two months. From the October ’07 high of 1,576, the S&P has lost 876 points and closed today right on 700. That’s a 55.6% loss in just 16 months. Below is a 2 year weekly chart showing the historic crash to date:

There is really no chart support beneath us other than technical pivot points. When we get into the 650 range there’s a little but it looks like 600 is the next support followed by support in the 450 region. The next two long term pivots are at 696 and then at 644. Next higher resistance is now at 717.

Next chart is a 60 minute display of the SPX. Note that the 700 close is right on my green channel downtrend line. This is likely to offer support just long enough for us to build a wave 4 and then I’m guessing the 700 level falls. They were talking up the 700 level on CNBS like it held some long term support, but I don’t see it here at all other than it’s a round number which always acts as support at least for awhile. All the stochastics are oversold… all of them from 5 minute all the way to weekly, monthly, quarterly… ahhh, okay, the YEARLY stochastic indicator is not quite oversold YET. Like Louise Yamada politely says, “that shows selling pressure:”

What’s there to say about the DOW? Big red candle on pretty high volume, but not quite as high as Friday. Volume on the DIA was higher today than Friday:

If I compare this wave to the down turn last October, I find myself now keying in and comparing today’s candle to the same place we were at on about October 6th and 7th. If that history rhymes, then we’re probably only a couple days away from some type of short term bottom if we didn’t put one in today already, and that’s possible as I see we’re up about 12 S&P points already this evening. Bottoms, though, with this type of oversold momentum usually require some type of catalyst to turn the tide of negativity around, sometimes that catalyst is negative news that produces a washout. Internally today’s 97% down volume was a little bit of one, but probably not enough of capitulation for more than a short time period. Again, looking at that early October timeframe, there was a little overlap intraday, but a pretty long string of red days following that big solo black candle. We have the same solo black candle on the 24th of February and 4 red ones following so far. Eight followed the one in October:

The Put/Call ratio did elevate today but did not get into the range signaling capitulation or excessive fear. This chart argues today was not a bottom:

Nothing else that unusual to report that Doc didn’t cover already. A lot of big red candles and most of the indices are sitting right on the bottom of their channels. They pretty much need to bounce at least a little here… I know I’ve been saying this but from these oversold conditions it’s either bounce or crash. So far it’s been crash and grind down a very steep channel.

While I don’t intend to be gloomy, the economic ramifications of going to the 400 area or lower on the S&P is quite somber. While it won’t be the end of the world, it will feel like it for many. It certainly is the end of the credit bubble, you won’t be seeing anything like those “good old days” anytime soon. And since we’re doing more Jim Morrison tonight, this is the end…

Doors – This is the End:

By the way... if you're not familiar with Jim Morrison, here's an interesting take on him. Tragic that he burned his light out so soon:

Final 24:Jim Morrison part 1