We barely had a chance to put up the title of the post this evening when the futures decided to drop. We had already noticed that the Asian markets were down but probably reacting to last Friday's drop in the US market.
We did notice an article in the WSJ that tries to make a statement about the US markets: "A new fear is helping fuel the latest stock-market rout: that booming global growth -- for years the engine of the world's financial markets -- may have trouble pulling U.S. markets out of their swoon this time around."
The other item, which may not have anything to do with this drop, was an article about Citigroup (C) wondering when the company actually knew about the bad news on their writedowns.
Either way, the Asian markets have dropped more and the futures are down nearly a percent. This follows a dramatic drop in the final minutes of trade on Friday. As the market had opened poorly on Friday morning following news from Wachovia. Wachovia kind of derailed the rally in the overnight futures on Friday morning.
The Dow opened lower by about 150 points and then traded in a range for the better part of the day. There was a brief drop that took the Dow near the 13K line but it bounced out of that range quickly. The rally that came with about two hours to go brought the Dow back to the 13,200 range going into the final hour of trading.
With about 40 minutes to go in the session, something happened that started some selling. We haven't been able to determine what that is and you know how we think about things like that...with no news, the move is much more significant. The drop into the close was impressive with the Dow dropping back to the lows of the day.
This down move tonight seems to be an overnight futures situation meaning it's not very important but the Asian markets are still getting hit pretty hard. Our opinion this evening is that the market is in a decision-making point. The poor trading over the past few trading days gives the buyers a chance to sit back and wait for better prices. Then there is the fear factor for those who have been watching their stocks drop.
Of course, the market is now oversold and that breeds bounces but there are many questions in the minds of investors. What will the answers be? We can only wait and find out. Meanwhile the overnight futures have found a trading spot so we'll see if there is any follow through in the morning. The Asian markets are still down and making new lows for the evening.
The fear factor is exhibited in the FSI index where the prices have now dropped below the 100 level:
Arithmetic index: 99.19
Market Cap index: 98.04