What A Historical Drop!

Despite all the agony going around the street, I am somewhat happy to be actually witnessing this historical slump first hand.

The Dow dropped over 18% just last week alone, making the biggest single week drop since 1987! The magnitude of the Dow's decline this time round has only been beaten by the market crash of the 70s and in terms of absolute points, the Dow has never dropped this many points all at once. This certainly is history in the making and further proof that investors are still herding creatures no matter how much information is available to them and how fast.

This is going to be inflation week ahead with the release of the PPI and CPI numbers (see economic calendar). I suspect the inflation data is going to turn in lower this time round as aggregate supply and aggregate demand falls along with the rising US dollar. But is anyone still concerned with inflation? Definitely not. With recession screaming through the air, I don't think many people would be overly concerned with inflation data.

On the technical front, the Dow is now back down to its monthly 200MA line, which is a critical support level. If we still do not see significant support in the form of an accumulation at this level, the Dow might head all the way down and break the 2002 low (about 7300). For now, the Dow remains in a strong short term and primary bear trend.


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