Yeaterday's market action caused IBD to change their view on the market to "Market in Correction"
Stocks Fall Hard In Heavy Volume, Adding To Slump
By PAUL WHITFIELD, INVESTOR'S BUSINESS DAILY
Posted 09/22/2011 06:34 PM ET
Stocks went from bad to downright ugly Thursday as two indexes marked new lows for the year amid a broad sell-off.
The financials- and commodities-heavy NYSE composite stumbled 3.6%. Earlier it was down as much as 4.9% as it marked a new low for the year. The Dow, which fell 3.5%, also notched a new low for the year. The Nasdaq and S&P 500 fell 3.3% and 3.2%, respectively, but held above previous lows.
The IBD 50 fell hard. The loss on its average stock was 4.8%.
Volume rose across the board.
New lows trounced new highs on the Nasdaq by 496 to 3. Declining issues led advancers by 6-to-1 ratios on the NYSE and the Nasdaq.
The dire action kicked IBD's market outlook to market in correction from market under pressure. In such a weak market, it's best to avoid buying stocks altogether.
Thursday's vicious action also raised the specter of a bear market. The NYSE composite once again fell more than 20% below its May high. The traditional definition of a bear market is a decline that reaches 20% or more. But the other indexes have not yet hit 20% losses.
Stocks opened lower Thursday on a slew of bad news. France and Germany reported that business activity in September grew at the slowest pace in two years, heightening nervousness about Europe's situation. Meanwhile, data from China showed that its manufacturing contracted for a third month in a row. And U.S. jobless claims were higher than estimates.
Wrap that around the Federal Reserve's glum statement Wednesday and there was nothing for even the most stubborn bull to feed on.
Commodity futures took broad and hard hits. Gold fell about 4% and silver 11%. Copper, often a harbinger of economic activity, slid almost 9%. Wheat and corn fell 5%. West Texas Intermediate crude slid 6%.
One of the few gainers was the U.S. dollar. PowerShares DB U.S. Dollar Bullish Fund ( UUP), an exchange traded fund that reflects the Deutsche Bank Long U.S. Dollar Index, rose 1% — its fifth straight gain.
Meanwhile, the Nasdaq's and S&P 500's moderately upward price channels fell apart. From the Aug. 9 low to the Sept. 20 high, the Nasdaq rose 13% in a choppy fashion. The index is now up 5% from that prior low.
Some stocks triggered the 7% to 8% sell rule Thursday. Barrick Gold ( ABX) dropped as much as 9% below a 52.88 buy point cleared in early September. Iamgold ( IAG) fell 7.4% below a 22.30 entry from a Sept. 8 breakout.
In this market, a disciplined investor's bias should be to cut losses and sell winners before they cycle into a loss. As Thursday's action shows, there are few places safer than cash.
investors.com |
