1:30pm (EST)
We knew the open was going to be ugly as Wall Street dealt with the possibility of a Japanese nuclear crisis and a slowdown in their economy. Futures were pointing towards losses of 2+% with a test to the lower levels. As we mentioned in this morning’s update those targets were easily taken out. Although there has been a bounce off the lows, the bulls look tired as they try to hold newer support levels.
We knew with volatility picking up there was going to be a massive move higher or lower once the market broke out of this range and now that it has, expect the volatility to get even greater. Most bull markets tend to extend to the upside on enthusiasm while most bear markets, or corrections, are heightened by panic and fear. This is exactly what we are seeing.
Better economic news may have put a cap on things today as the Empire Manufacturing report came in better-than-expected at 17.50 versus expectations for 16.10. Elsewhere, the Import Price index showed an increase of 1.4% compared to a forecast for an increase of 0.9%. Of course, today’s main event will be the minutes from the FOMC meeting in a under an hour.
The Dow opened with a loss of nearly 300 points and traded to a low of 11,696 and is currently off by 200 points to 11,792. We mentioned 11,800 as the next wave of support and said 11,500 could come into play if this level was penetrated.
The S&P 500 is down 21 points to 1,271 after touching a low of 1,261. We had outlined 1,275 and 1,250 as two key areas of support and they have also come into play today.
The Nasdaq is lower 45 points to 2,655. The index has traded to a low of 2,618 and we have said to watch for 2,650 near-term- and then 2,500.
All three indexes are where we expected them to be and this is either a great buying opportunity or we are going to see a further downside with a lot more volatility. Either way, we are setting up for some great trades.
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