Down Down & Away!

The Dow went down down and away today, dropping over 5% in an all out bearish breakout. It certainly looks eager enough to touch and probably break (like the S&P500 did) the 7200 support level (low of the last crisis in 2003) that I spoke of yesterday. At this rate, it could take out the 7200 level by next week! In fact, the S&P500 has already taken out the low of the last crisis in 2003! To put the severity into perspective, since the market crash back in 1974, never have a market crisis caused the S&P500 or the Dow to take out the lows of the preceding crisis! Again, this is history in the making.

Leading indicators reported today continues to point towards economic contraction as the Philly Fed survey also turned in its lowest level since October 1990. More evidence of pessimism emerged as investors rushed for the safety of bonds today like a band of panicking zebras, depressing bond yields to new multi-year lows across the board. In fact, bond yields were not nearly this depressed in the last crisis! Like I mentioned a few days ago, such is the kind of pessimism that is needed to make stock market bottoms. The bulls were just too active around the 8200 region to convince me that it is capable of marking a bottom.

So, things certainly looked pretty lousy both on the fundamental and technical front. But lousy only for stock buyers. For sophisticated investors employing a mix of stock trading and options trading strategies (like myself), this must be some pretty profitable times. :) Of course, my stock pick subscribers made some decent profits as well. Tomorrow is QUADRUPLE WITCHING DAY (see economic calendar) and definitely a day of extreme volatility. Best to stay safe and sleep sound for the weekend.