Global Meltdown

Close examination of the global markets reveals an interesting thing, that being most of them were down big on Monday.  Taking a look at India first, we read that their main index was down about 10% in two trading hours which triggered a two hour trading halt.  After the halt the index managed to rally back and only close down 4.2%, only.  Since its high on May 10th, that index has now dropped 20%, but of course quite a bit higher than it was just a year ago.  The Brazilian market was down sharply along with Mexico and Argentina, all down over 3% on Monday.  

The markets around the world were hit hard in a sea of red that spanned the globe but here in New York, the picture was quite a bit better, at least in terms of the Dow.  Yes, it’s true it was down pretty much all day even though it did peak into positive territory briefly in the afternoon.  The Philadelphia Semiconductor index fared the worst as it stayed down most of the day and ended about 4% lower.  The culprit here could have been a WSJ article that brought up option expenses that will probably be larger than previously expected.

At any rate, our initial read on the market in yesterday’s post was a bit off the mark as we expected a relatively mild week but Monday we got started on a very volatile trip.  Based on the trading on Monday, the Dow seems to have some support here at the magic round number of 11,000.  Even with a couple of attempts to go down there the last few days, including the global meltdown on Monday, the Dow has decided not to go through that magic number so far.  We may need to have that 200 point rally we discussed in the last post.  Maybe that will come as we head into the holiday weekend.  We’ll see.

If this rally materializes, we recommend that you take that opportunity to lighten up on your long positions.  The market has now been kind enough to show you some downside that may not be over for a while.  Even the bulls that were quoted in the media were saying that this pullback is not done.  Well, we agree that the worst of the decline is ahead of us but we will see violent rallies between now and the ultimate low.

Be careful out there…

Dow Industrials:  11,125.33  -18.73
RYVNX:   21.30
RYAIX:  23.61
TLT:  84.61
BEGBX:  13.66