World Markets Plummet – US Not Spared

Jan 21, 2008: 6:07 PM CST

A tremendously precipitous situation awakes US stock traders on Tuesday morning. World markets deeply fear a potential US Recession and what it may mean for them.

Traders who spent the day away from the market, and who do not check in to see overnight markets, will be in for an absolute shock when they open their trading platforms Tuesday morning – a shock many will absolutely not expect.

World markets plummeted precipitously on January 21, with some foreign markets plunging more than 7%. Let’s look quickly at what happened and what it may mean for the US stock markets:

Let’s look at a table of what happened to the overseas broad stock exchanges (stock index used is similar to the US Dow Jones or S&P 500 average):

Let’s take a look at France’s CAC 400 Index to see a visual of how much damage these markets took:

Weekly damage:

Remember how I said that the next test of a breached 20 and 50 moving average is often the rising 200 period? That happened exactly to the French index, and could very well (in fact, may very well) happen for the US Stock Market.

The German DAX index shows how a prolonged momentum divergence can resolve very badly to the downside:

To add to the bad news, Dow Jones futures contracts were down 4.5% today, forecasting a potentially devastating open for the broader US Stock Market.

Here is the most recent price (weekly chart) for the S&P e-mini futures contract as of 8:00pm Eastern:

Be aware of this major overseas development, and try to adjust accordingly. Markets fall so much faster than they rise, and the risk remains to the downside for the time being.

Please be careful. Tomorrow may make the (recent) record books and it probably won’t be pleasant.

9 Comments

9 Responses to “World Markets Plummet – US Not Spared”

  1. Charlie Says:

    How much of the global sell off is tied to bad U.S. debt and the rippling effects of the credit meltdown from last summer. Sooner or later those nasty I.O.U.s we write as our worthless currency will have to be corrected.

  2. Ana Says:

    Corey

    Foreign markets have taken a spill and Stock index futures in the U.S. did trade for several hours, and the S&P 500 lost just over 5%, or 70 points, at its worst before recovering a bit before trading stopped.

    All this is putting an exclamation point on an impending/ongoing crash!

    Speaking of Indices, I would like to share with readers here a Matrix of Tools which I am still learning to keep us from rushing in, at:

    http://www.tradingsuccess.com/blog/

  3. Corey Rosenbloom Says:

    Charlie,

    There are plenty of reasons for global sell-off, but the #1 reason as headlined across the mainstream media is that the foriegn markets fear a US Recession and how global economies may slow if the US slows, akin to the saying “If the US sneezes, Europe catches a cold.” The mainstream media isn’t reporting the whole picture, and you are right to point that out.

    I’m by no means a perma-bear, but I can name off a dozen reasons why the US market should have been lower weeks or perhaps months ago, but it was not. Whatever force was artificially supporting the market has now ceased, and the markets may run a normal course, which is a steep correction. This isn’t the end of the world, and this isn’t the beginning of a 50 year bear market. It’s a correction, and one that has been overdue.

    The US may be in trouble and foreign markets are increasingly becoming aware of this fact. How far it will go is the ultimate question, but these are historic times we are living in.

    Thanks!

  4. Corey Rosenbloom Says:

    Ana,

    Thank you so much for the comment. It’s an extremely difficult time for traders and actually moreso for investors who may be extremely confused by the recent action. They are told to hold through corrections, yet the news gets worse and worse by the day it seems. I am not licensed to provide long-term investment advice, but I feel the pain of these investors as my long-term holdings and retirement accounts plunge right there with them.

    Thank you for sharing your thoughts and the link. All the best,

    Corey

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  7. TheFinancialNinja Says:

    I’ve got a clip of a guy going bottom fishing… on the Russell 2000 on SUNDAY night. Can you say f’d?
    http://benbittrolff.blogspot.com/2008/01/this-guy-went-bottom-fishing.html

    Be careful all, and good luck.

    TheFinancialNinja

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  9. Steve plummet Says:

    we had another plummet last Week Friday May 7th 2010 bloody awful Qantas dropped to 253 on vol of over 36m