Stocks had their worst day of the year and "worst week since 2012!" It is amazing to watch the mass hysteria on financial TV, especially CNBC, with a market that is now down THREE PERCENT! from its peak.... after a 30%+ year. They literally used the word "turmoil" on the screen most of the afternoon. Just imagine a good ole fashioned 10% correction which the market is long overdue to have. Well today was a rare thing in the QE market, an actual follow through day to the downside after yesterday's selling. This would be relatively typical action in the pre-QE era, but seems shocking in the era the Fed believes its mandate is a higher stock market. The S&P 500 fell 2.09% and the NASDAQ 2.15%. If you lightened up a bit Wednesday when we noted the NASDAQ had hit its resistance line you avoided some of this downdraft but again in the big picture everyone has become spoiled with a market that just grinds up relentlessly for months - it is not that normal.
Despite the 2 day pullback the NASDAQ is still around the halfway mark of this range it has been in for a long time. If the selloff continues next week there is a very obvious area to make new purchases - the lower purple line. One day buying that area will stop working since it has become "too easy", but until it fails purchases at/near the lower purple line and sales at/near the upper purple line have been a winning formula.
That sort of drop would probably coincide nicely with the S&P 500 coming back to these twin support lines which are very near each other now.
The NYSE McClellan Oscilator did take a turn for the worse today, falling well below zero....
...and breadth was the worst in a long while; actually the absolute worse in half a year just beating out a session in August.
Volatility had one of its largest one day spikes in a long while.
We mentioned emerging markets just yesterday and that is the proximate cause for today's selling along with China and the market just being very overbought on a weekly time frame. We have issues in Thailand, Turkey, Argentina, among others. Do any of these matter? You never know until after the fact - in 97 a currency crisis began in Thailand, then went to Russia. But we just had a crisis in Cyprus that mattered for all of a month. Etc.
One other area to point out is natural gas which had a massive spike today and seemed to really hit the transports which have been in a league of their own (along with biotech stocks) of late.
It was an interesting end to the week and with Bernanke's last Fed meeting next week we should be in for some interesting sledding next week as well; see you then.