Top Line: There really is only one story this evening and that is the global meltdown in stocks. We have been calling for global markets to go down but now that they actually have, we know that can not be a good sign for the US market.
With the US markets closed on Monday we did not post on Sunday evening like we normally would. Our rule is to post the evening before a market day usually by midnight Central Time.
With the US markets closed, the rest of the world has taken a beating. For two nights in a row, Asia has been hit hard with the over extended markets there ripe for a massive sell off. The Hong Kong market, measured by the Heng Seng Index, is down 14% in these two trading days. From its highs in late October around 32,000, it is trading at 22,000 this evening for over a 30% loss in about three months.
Over in China, the Shanghai SSE Index has lost over 10% in the last two evenings. This index traded at 6125 in late October and is now trading around 4650 for a loss of nearly 1500 or just under 25%. Unbelievably, the SSE is still above its May and June highs from 2007.
In India, we don't know how to get quotes for trading taking place right now, but we can only assume it is down again this evening. Last night it dropped 7.5%.
Looking at the hapless Nikkei Dow in Japan, that index is down about 10% in the last two evenings as well. This index is trading at prices not seen since two and half years ago. We have talked about the parity of the Nikkei Dow and the Dow Industrials. When they came into close proximity, the Nikkei moved up quickly. Taking the Dow Industrials close from Friday to the current level of the Nikkei, there is still 500 points of room. But that's not why you're here, is it?
You're here because you want a read on the US market. Well, right now as we write the Dow futures are down 500 points or a little over 4% with the SP 500 and the NASDAQ100 futures down a similar percentage.
This foreshadows a dark day on Wall Street for Tuesday. As we have mentioned several times in the past, and it hasn't happened, the worst selloffs occur After stocks get oversold, which they definitely are now. As the market opens on Tuesday, there should be a loud thud. We're not sure how the market will open exactly but buyers will be scarce.
We have been warning in this blog about the dangers of the stock market and just last Thursday evening we titled our post, "The Break". That break was a technical breach of long established trendlines and support levels and signals a long term bear market in the making. Tuesday's trading will probably confirm a bear market to many. Of course, what it will feel like on Tuesday will be that the worst may just be over--don't believe it.
The stock market has a lot of room on the downside and it will be just getting a good start on Tuesday. We say that due to several reasons but they don't matter this evening. We've said most of them over the past several months anyway.
It seems pretty meaningless to go over last Friday's action, as we described it on Thursday evening, it would be "mere noise". Way back then, IBM had announced earnings and every bull was excited. The market opened on Friday with a large up move to the tune of almost 200 points but that didn't last too long. Both the Fed and the president were saying there would need to be some help for the economy if we were going to prevent a recession. As you can tell, the global markets didn't really think much of it either.
The January options were expiring on Friday and there was a lot of movement in the volume department. The volume was not very helpful in assessing what was going on under the surface because it was mostly just unwinding positions. Come back tomorrow for our take on Tuesday's trading. It should be something to see.
The market is about to collapse and we hope that you have taken your portfolios out of harms way. We have enjoyed a month's worth of falling markets and Tuesday will be a large break that will scare people so more selling will come. Some will sell tomorrow, some will buy but we think the course of the market is down for the time being.
FSI: 90.31 ( this number should be much lower after Tuesday's trading.