99% Down Day – 08/08/11 © ™

  • Short Term
  • July 7, 2011 – Present
  • Step 2 Down Underway 
  • Action Status – Sold

Today is another 90% plus down day for the market (actually 99% down).  That makes 3 out of the last 5 days that were 90%+ days.

The score was DJ Industrials down 635 points (5.6%), NASDAQ was down 175 points (6.9%).  Those are serious numbers.  I’m glad I’m out and recommended all cash many, many points ago.  Hopefully you went into cash too.

Today we hit the downside measurement for the head and shoulders formation.  We are probably waiting for some type of a climax to finish this phase of the decline.  In addition to meeting the head and shoulders measurement, The SP 500 has cut the entire bull market rise from March 2009 in half.  Say it again, we are down 50% of the bull market since March 2009.  In addition, the SP 500 has now declined 18% from the peak in May 2011.  Those are some good sized numbers.

I’m beginning to think that a possible stopping point could be the area of the July-August 2010 lows.  That would be a 24%+ correction.  Of course the worst possible scenario is always that another bear market has begun.  Even if that were true there should be a rally back towards the old high that allows a last chance to get out without too much damage.  So far that hasn’t happened.  In 1929, it happened in the early part of 1930 but most everyone was wiped out by that time because they were so highly margined.  They were forced sellers due to margin calls.

This decline makes you wonder what might be going on behind the scenes???  Is a large bank or hedge fund in trouble and having forced liquidation???  If this a normal decline, I would think we would have had a panic climax be now but the selling just keeps coming.  We all know that the banks in Europe are in trouble because of the sovereign debt situation.  They may be stuck holding worthless paper.  In the USA, are there any large banks that have been foolish enough to sell credit default swaps (CDS) protecting against sovereign debt failures???  Hopefully that isn’t true but if it is, I think Congress will correct that oversight.  I want to see banks return to stodgy old institutions and Wall Street to stay out of the banking business.  Glass Steagall in 1933 was a good idea and it still is but it was repealed in 1999 and here we are, in trouble in 2008 and hopefully not in trouble in 2011.

Chart for the banks, 60 minute bars – Notice the recent crash phase

08-08-11 BANKS 60 MINUTE BARS

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