Whoa. That was no fun at all.
A meltdown in the energy and commodity areas cast a long shadow over the market today, sending most stocks and most groups lower. The Dow Industrials dropped another 49 points (-0.5%) to 10750, the S&P 500 fell 10 points (-0.8%) to 1255 and the Nasdaq lost 14 points (-0.6%) to 2245. The Russell 2000 was hurt even worse, falling 11 points (-1.5%) to 717. The Dow Transports gave up 1.4% and the Utilities lost 0.8%. Bond yields were generally higher, with the long end moving up a little more than the short end, and flattening the yield curve a bit — 6-month: 4.66%, 2-year: 4.60%, 5-year: 4.52%, 10-year: 4.57%, 30-year: 4.66%. The first auction of the new 30-year bond takes place on Thursday.
Market internals were, well, pretty gross, and volume ticked up from yesterday’s low levels. Advances/declines were worse than 1 to 2 on both exchanges, with up/down volume about 1 to 3 on the NYSE but only 4 to 5 on the Nasdaq. New highs are still contracting: highs/lows were 90/33 on the NYSE and 100/37 on the Nasdaq.
By far, the commodities groups took the brunt of the hit today — some of these numbers are kind of scary, so you might want to just skip down to the next paragraph, or at least keep them out of sight of children. Leading the losers were the gold & silver stocks (-7.1%), oil services (-6.1%), steel stocks (-5.6%), natural resources (-4.4%), commodities (-3.4%), oil stocks (-3.4%), natural gas stocks (-3.2%), housing stocks (-2.1%), disk drives (-1.5%), brokers (-1.5%) and retailers (-1.2%). No winners to speak of.
Energy prices continue to move lower - you’d think that would be good news, but apparently not. Crude oil fell to near $63.00/barrel, with gasoline at $1.58/gallon and natural gas hanging on at $7.96/mBTU. The dollar index is holding steady at 90.24, but gold took its biggest drop in years, falling to near $550/ounce. Gold didn’t fall alone - nearly all metals prices came tumbling down today.
BMB Note: Ok. The drop in the energies and commodity stocks was bad enough - yes, BMB’s account took some punishment today, and there was a little bit of liquidation. But it wasn’t exactly a panic - if you’ve been investing in commodity related areas for any time at all, you know they can be pretty volatile. Not only that - you also know that they’ve been quite extended, and should have recognized that a correction was likely to happen soon. Now the question becomes how far and how long. No way to know that yet. The good news was that, even if the short-term movement looks a little ugly, there hasn’t been much long term damage done. Yet.
Now on to the other bad news: the rest of the market doesn’t look real good either. The S&P violated its 1260 support, the Nasdaq is sitting right near its 2240 support level, and both are beneath their 50-day MAs. Add to that an upturn in the equity put/call ratio averages, and we’re looking at some pretty solid sell signals right now. Time to be defensive and honor your stops, sell if/when your holdings break support. No reason to fight the tide here. If things change, we’ll change our tune. For right now, the shields are up. Traders should probably be more interested in shorts than longs.
