Japan Woes Worsen, Futures Down Big Time

8:45am (EST)

The bulls played defense for much of Monday’s session as the bears pounded away at lower support levels. For the first time in weeks, oil took a back seat as Japan’s devastation and hardship played a major role in yesterday’s drop. Although there was some strength into the close, the major indexes closed slightly below support.

The Dow fell 51 points, or 0.4%, and settled at 11,993. The index touched a low of 11,897 and gained 100 points off the bottom after our midday update. We mentioned in yesterday’s brief there was further support at 11,800 if the Dow dipped below 12,000 but a continued close below this level would not be good.

The S&P dropped 8 points, or 0.6%, to finish at 1,296 after kissing 1,286. There is near-term support at 1,275 but a print below here would likely lead to 1,250.

The Nasdaq got smacked for a 14 point loss, or 0.5%, and closed right on 2,700. The index traded down to 2,682 with 2,650 providing the next layer of support. A break below 2,650 could lead to a test of 2,500.

There were a few pluses in a day full of negatives. For one, there was a nice bounce off the lows into the close. Two, volume was unusually low compared with other sell-offs which has been accompanied by high volume. And three, the CBOE Market Volatility Index (VIX, 21.13, up 1.05) stayed below 23.

None of that matters now but it was just enough to keep the bulls hanging around ahead of this morning’s ambush.

Futures are pointing towards a nasty open as Japan faces a possible nuclear catastrophe after a third reactor exploded. The country has issued a warning for people to stay indoors to avoid radiation exposure.

It is hard to prepare for these types of events in the market but we have been telling you that the volatility was going to explode. Although we were looking for one last bullish run this week, the bears are going to crack another layer of support and those thoughts are quickly fading.

As we head to press, Dow futures are down 272 points to 11,654 while the S&P futures are getting hammered for a 38 point loss to 1,253. The Nasdaq futures are getting crushed by 70 points and are at 2,220. It’s going to be a sea of red at the open, folks.

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Japan Woes Worsen, Futures Down Big Time

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