The market has sold off hard in the last three days. Friday’s inflation report rattled the market and it may be pricing in 75 basis points on Wednesday. The selling was very strong today and virtually everything was hit. The major averages gapped down at the open and it was pretty much all downhill from there. All the major averages finished near their intraday trading lows. The COMPQ and the NDX fell 4.68% and 4.60% respectively. The SPX declined 3.88%. Volume was higher across the board. It increased 15.82% on the Nasd and 16.26% on the New York. This showed distribution in all the major averages. Leading stocks were hit hard as well with the leaders index declining 6.15% on the day. The index closed in the lower half of its intraday trading range on higher and above average volume. The heavy selling continued today with all the major averages taking out recent lows on high volume. The SPX finally officially joined other major averages in bear market territory. The action today showed heavy selling by large institutional players. The bear market deepened today and it looks like the third leg of this bear market is beginning. We can’t know just how far it will go but historically the third leg, if it proves to be the last one, often is the worst of the three. It contains to capitulation phase and can get ugly. A lot of damage has already been done and there is likely more to come. People who are tuned into the market saw this coming and should have mostly gotten out of the way. The good news is that after every bear market comes a new bull market and they can be very profitable. You can trade a bit if you want, but the main goal in a bear market is to not give back much if anything of what you made n the bull market. If you can do that you will retire rich. Jerry
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