If the source of this expression is unclear to you, you are young! Back in 1990, when Bush the First prepared for a war with Iraq, Saddam promised him ‘The Mother of All Battles," and the expression stuck Our New High – New Low Index has been a strong, reliable indicator for years, but in 2008 it delivered to us ‘The Mother of All Spikes."
The FED will announce interest rate tomorrow and the market is looking for at least .50 basis point cut.
Well we keep getting saved each day from that October 10th low taken out. Everyone and their Grandmother is watching it. I thought for sure we were going to get it on Friday…but nope we hold her steady. Then I overslept this morning and after seeing Asian markets down huge again…I race to the office so I can see if we get those lows taken out this time. Whew saved again…
I for one would have rather seen capitulation in the market this morning, but we again got saved holding right at the October 10th lows. The futures were limit down prior to the opening after most Asian markets had tumbled 10%. An all out capitulation event may have washout the panic to set us up for a significant rally next week. We’ll have to see if this saving ourselves will suffice to propel the markets forward.
Today the DJ saw another triple digit move during the day and another 500+ range day. Since September 15th there have only been three days that have NOT had triple digit moves. Energy and Pharmaceutical was the leading sectors today while Housing, Airlines, and Gold were the weaker performers.
Dollar continues to be bought, Gold breaks its supports, Oil hits $66…Coper down 9%. The trends continue…
The indexes traded in what is called an inside day. The ranges of the day was contained within the ranges of the previous day. This is a contraction of the volatility that we have been seeing.The DOW traded in a little over 200 point range, yet the day seemed to be quiet and non eventful. This coiling condition will typical lead to a powerful move in one direction or the other, many times giving a false breakout to one side first. Many of these indexes have formed triangle patterns.
A few headlines of note…During the last quarter household net worth lost nearly $2 trillion. Add in concerns about jobs it is easy to see why spending by consumers is falling quickly. Millennium Global Investments was rumored to be liquidating a hedge fund that concentrated in emerging markets. Several projections indicate that 700 hedge funds will close down by the end of the year. One reason is they are so far from their high watermarks, it is not feasible for them to continue to stay in business to earn back their losses, even if their investors are willing to stay invested with them. They are likely to spend the next few years attempting to just get back to even. Getting back to even does not earn them any performance fee’s and thus many are closing shop.
For the first time in 5 weeks the markets closed positive on a weekly basis. The markets found some upside follow early in the day but gave those gains up in afternoon selling. Traders simply do not want to be long this market overnight, much less a weekend. Oil jumped back above 70 dollars after dipping below 70 yesterday. Only 3 months ago oil was making historic all time highs. It has since dropped near 50% of its value.
The major markets dropped rapidly, as volatility rose to new all time records. The VIX was over 80 during the day. As the day progressed some intraday bottoming action formed and the result was a 400+ up day for the DOW! We were down at one time over 400 points in the DOW and finished up over 400 points. This rally occured after much bad news was announced this morning. This is a sign that sellers are exhausted at these levels.