9:10am (EST)
Folks, this is the most exciting market we’ve seen in quite some time and the dramatic increase in day-to-day volatility is unfolding just like we thought it would.
The market’s moves are reminiscent of the huge price swings in late 2008 and early 2009 when everybody panicked over how bad the recession would get. When we said the market is getting ready for a big move…we weren’t kidding.
Tuesday’s sell-off was the fifth time in six trading sessions that the Dow has hit triple digit swings and we will likely experience this for the rest of the week, if not longer.
Greece was the word that dominated the headlines yesterday as talk heated up on if the debt crisis would spread to other countries. If so, then Europe would have an even tougher time putting together an aid package if a larger country such as Spain or Portugal were to get in trouble. We mentioned yesterday that Spain said it didn’t need a bailout but once the snowball started rolling it turned into an avalanche. And there is mayhem in Greece this morning as protestors take to the streets…
As a result, the Dow fell a whopping 225 points yesterday, or 2%, to finish at 10,926 and well below the 11,000 mark.
Alcoa (AA, $12.58, down $0.57), a Dow component, continued it three session slide as it fell another 4% while another blue-chipper, Caterpillar (CAT, $66.70, down $3.24) dropped nearly 5%.
Drug stocks were a safety net for some investors as they pushed shares of Merck (MRK, $35.81, up $0.54) and Pfizer (PFE, $17.26, up $0.35) higher for the day. Both stocks are members of the Dow.
The S&P 500 gave up 28 points, or 2.4%, to close at 1,173 while the Nasdaq broke down like a rented mule. The index suffered the worst beating, dropping 75 points, or 3%, and finished at 2,424.
The good news is that the market is still in our trading ranges we have mapped out for the past few weeks. In Sunday’s Weekly Wrap we said to watch for a near-term support at 10,800 for the Dow; 1,150 for the S&P 500; and 2,400 for the Nasdaq.
Little did we know we would test the top of the ranges on Monday and on Tuesday we would be talking about key support levels. That’s how volatile we have been in 48 hours.
The bad news, if you are a bull, is that futures are pointing towards a lower open despite a decent ADP report. The (ADP) Employment Change report, which measure jobs in the service sector, showed a gain of 32,000 jobs versus the expected increase of 30,000. Didn’t matter.
As we head to press, Dow futures are down 80 points to 10,812 while the S&P 500 futures are off by 12 to 1,160. The Nasdaq 100 futures are in the red by 20 points and are at 1,948 as we head to press.
We mentioned the good, the bad, and now all you are missing is the BEST news. And we have some for you.
Garmin (GRMN, $37.48, down $1.50) is down to $32 in early trading after reporting earnings this morning. We have been preparing for a pullback and we have been profiling a lot of put options in our Members Area. Garmin happened to be one.
We have also profiled TWO New Trades this morning so let’s get to it. Don’t be scared…we are loving this market!
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