As I’ve mentioned in recent weeks over and over again, the market is being driven by news more than anything else and we have not been anywhere near a washout capitulation. I also warned that the market has been not acting as if it is ready to bottom:
…we still have not seen full blown panic selling to completely wash out all the weak hands
In an ironic twist, Wall Street shaved $700 billion off its valuation after realizing that the US government wasn’t about to rescue it with a blank cheque for $700 billion.
I really didn’t predict today’s carnage, but I’m not surprised at all to see the Nasdaq falling -9.14%, the S&P 500 Index down -8.81% and the venerable Dow Jones down -777.68 points.
Almost every single metric known to technical analysts hit the redline. It is still too early to come to a definitive conclusion and I’m still looking at a lot of information but here are some quick facts:
During the day, volume flowing into declining stocks as opposed to advancing stocks on the Nasdaq hit an astonishing 80:1 ratio.
The VIX volatility index reached a high of 48.40% (and closed at 46.72%) to put that in perspective, that is higher than what we saw from this indicator in 1998 (45.74%)during another financial crisis.
The percentage of S&P 500 Index (SPX) components trading above their 50 day moving average fell to 9.60% - below the critical 10% threshold.
On the NYSE advancing stocks were a paltry 53 while declining stocks were 2,842. And on the Nasdaq, advancing stocks were a bit higher at 424 while declining stocks were 2,563. Volume flowing into declining stocks on each stock exchange easily registered as a Lowry’s 90/90 day coming in at 97% for the NYSE and 98% on the Nasdaq.
The only outlier was the options market. The CBOE put call ratio actually fell to 0.79 and the ISEE sentiment which measures retail option traders activity was similarly unimpressive. I have no idea why the options market showed absolutely no concern during a day like this. Very puzzling.
I can’t wait to see what tomorrow’s market brings. I’m still not convinced that we have the worst behind us but at least we can safely say that we are on the road to capitulation.
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