Clever Move (Down) By The Market! SPX, Nasdaq, AIG, HIG, PRU, BAC, COF, WFC, GS

This morning, the market traded higher as home sales and factory data were better than expected.  But, within minutes after the data were released, the sell-off began.  The financials led the market down and kept dropping until the close.  Insurers were hammered!!  AIG, which tripled in August from less than $15 to a high of $55.9 just last week, slumped another 20% on top of yesterday’s 10% fall.  HIG gave back more than 11%, and PRU was down 7.51%.  The "big names" in the financial sector also got hit: BAC -6.42%; COF -6.01%; WFC -4.76%; GS -3.2%.

Today was a very "coordinated", profit-taking session.  Almost every stock saw a sharp downturn at around 10:05 AM (EST).  It was simply time to take the profits.  It was also very, very clever!  The market had just recently pushed above a trading range.  But, it could not find enough buyers to follow through.  SP500 (SPX) finally rallied above 1015 and found itself stuck under 1040!  By "forcing" the indices down like this, the market essentially brings itself back into a more neutral ground.  Now, it can wait for the jobs/unemployment data due out this Friday.  If the market did not take this quick drop, when the unemployment data indeed confirms recovery, money on the sidelines may not be as willing to jump in with SPX above 1030.  Now, buyers will be more ready to engage.  On the other hand, if the unemployment data is worse than expected, the market can also go down further.

Therefore, today’s move down was a very "clever", technical development.

In any case, the Dow was down 185.68 points; SPX lost 22.58 points; Nasdaq tumbled 40.17 points:

XLF (financials) stumbled 5.37%.  Commodity sectors were mostly weak: XME (metals and mining) -2.51%; XLE (energy) -1.74%; OIH (oil services) -1.47%.  USO (oil) was down 2.16% while UNG (natural gas) fell another 4.2%.  Techs were also weak with INX2 (internet) falling 2.6%.  FXI (Chinese ADRs) lost 2.29%.

SPX

SPX fell 22.58 points to close at 998.04.  It closed just under 1000 and below its daily MAs!  The MACD went lower.

Nasdaq

Nasdaq tumbled 40.17 points to close at 1968.89.  It also fell below its daily MAs.

Today’s big drop sent VIX jumping +12% higher, finishing above 29.  It could easily test 30 from here.  We should see some bounces tomorrow.  But, with this sharp downward momentum, we should see a bit more selling before Friday.  SPX is finding to keep 1000.  Below 1000, the immediate support is around 980.  We locked in some nice gains on AIG puts today, and will be looking for more downside plays if the market stays weak.

Good night and HappyTrading! ™