DOW – 173 = 16,141
SPX – 15 = 1862
NAS – 11 = 4215
10 YR YLD – .11 = 2.09%
OIL – .13 = 81.71
GOLD + 8.90 = 1242.10
SILV + .05 = 17.55
Go back a mere 18 trading sessions and the market was at all-time highs. The Dow hit an intraday high of 17,350 and a closing high of 17,279, on September 19th; that was 18 trading sessions in the past. For the Nasdaq composite we have seen a 10% correction from recent highs. That means this drop happened fast, and it also means the bear may have more room to run; this move is not mature in terms of duration or magnitude.
The major indices have dropped under the 200 day moving average; we were waiting for confirmation; we got it. The S&P looked to bounce off a different trendline. If you draw a straight line across the S&P lows beginning with the lows from 2011, which is where we saw support and a bounce today, at the 1820 level; it is also very close to the support levels from April at about 1815, which we talked about on Monday. That is an intermediate level of support, but it held today, and you have to respect the line, unless or until it breaks down.
Once we hit certain levels, people start to feel the pain and they move to safety; it is risk off, or a margin call is triggered, or you just get tired of the pain. And it was looking painful today; earlier in the session the Dow was down 460 points. The Russell 2000 index of small cap stocks reversed declines and finished the session in positive territory. For most of the trading day investors rushed for safe havens, including US Treasury debt. The yield on the 10-year Treasury note tumbled as low as 1.87%, its lowest since May 2013. Low interest rates are great news for people who want to borrow money or refinance their mortgage, but they typically show up when the economy is in the dumps and there’s not a lot of demand for loans. The low rates are lousy for savers. And even more ominous, low rates come with a whiff of deflationary stink.
And oil prices continued to slide, at one point down to almost $80 a barrel; great news when you go to fill up at the pump, but another indicator that demand is slow around the world. The lower oil prices are weighing heavy on the shares of oil drilling companies and the big oil companies. The worst-performing S&P Composite 1500 subsector this year has been Oil & Gas Drilling, down 22% through Tuesday, according to FactSet. The Oil & Gas Equipment and Services sector hasn’t fared much better, with a drop of 17%. You might think it would be a positive for the airlines, because fuel is a big expense, but no; airline stocks were down 4.9% intraday, because it turns out that one of the worst places for an Ebola patient is inside a sealed tube at 25,000 feet.
