The Damage Done Across the Board

Jun 6, 2008: 6:56 PM CST

Today’s 3% market plunge wrecked havoc on the otherwise bullish conditions of the broader US Indexes.  Oil rose drastically, and other commodities benefited as the Dollar Index fell as well.

The Russell 2000 and the NASDAQ are still above or testing their rising daily key moving averages, but the Dow is well beneath these key zones, and poised to head lower.

The Russell 2000 is still the relative strength leader, and stands just above its key rising 20 period moving average, but bulls lost ground above the rising 200 period moving average, carving out a potential false breakout.

The Dow has the worst technical (chart) picture of the four major US Indexes:

The Dow fell just shy of 400 points today, taking it down to 12,200, a level not seen since late March.

I actually overheard someone say today “Well, the decline wasn’t that bad because yesterday the market was up so much.”  While technically true I suppose, the Dow is still 200 points lower than where it opened yesterday, and any buyers yesterday are ‘underwater’ at the close of today’s action.

Regardless of whether today’s action was ‘bad or not,’ a 400 point decline in the Dow Jones Index calls for further attention, especially in an environment where the larger time frame trends are turning lower and the Dow stands roughly 500 points away from new 2008 lows.

What happened from a Sector perspective today?

Financials underperformed by the largest measure today (losing 5.32%) while the ‘leader’ (not surprisingly) was the Energy sector, which actually lost almost 2% today.  The ramifications of the negative news were bad enough to drag even oil-based stocks down today (Exxon-Mobil – XOM – actually lost 2.5% today, not much different than the Dow Jones).

Finally, what happened with bonds?  Investors took the opportunity to unload stocks and flee to the safety of bonds, such that bond prices rose while yields fell in similar percentages to the broader stock market.

The US Dollar Index fell by almost a full percent today, while gold prices surged in a trend day up 3%.

Mark today as a historical day, print & annotate your charts, and read what various commentators have to say about today’s action.

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