Stock Market Crash 8-18-11

The futures were in a bad mood overnight on Europe news. One of the European banks, that continues to remain nameless, borrowed overnight at a higher rate than would have been expected. This set off red flags with traders and smacked of desperation. Professional traders do not wait and see, or try to rationalize events, they simply sell first and ask questions later. In this case, the Euro banks sold off in force setting a bad tone for the upcoming New York session.

As the Claims and Consumer Price Index (CPI) economic data hit at 8:30 AM, markets only drifted lower. Inflation was hotter than expected. After the opening bell, the Dow Industrials collapsed from 11400 to 11100, 300 points, 2.6%, in only three seconds. Ditto the SPX which lost 30 points, from 1190 to 1160, 2.5%, in seconds. This action allows losing traders to curse and blame the machines once again.

The next barage of data hit at 10 AM. Things only got worse from there. Existing Home Sales fell for the third time in four months, the housing recovery is on a milk carton. Philly Fed data accelerated the negativity drastically. The long string of negative manufacturing news seals the fate of the millions of unemployed Americans. There was nothing positive to hang your hat on so the sellers entered in force.

During the morning, the 10-year yield fell under 2%, a print of 1.97% occurring before the yield recovered to finish the day slightly above 2%.  The 30-year rate hit 4.15% matching levels from the 1950's. Gold soared above 1820 as traders use it as a safety play, but everyone is aware that the CME may raise gold margin requirements at any time.

The CPC put/call ratio tagged a lofty 1.49 indicating a wash out for the indexes and a snap back rally would be anticipated moving forward. Ditto the NYAD that posted a basement -2700 reading. The TRIN jumped near 4 during the session and settled at 2.18, again consistent with a washout selling day that begs to see a bounce back.

After the smoke cleared, the Dow finished the day down 420 points, or 3.7%. The SPX lost 53 points, or 4.5%. The Nasdaq fell 131 points, or 5.2%. Congress continues to enjoy a summer vacation, basking in the sun. President Obama arrives at Martha's Vineyard to party with the very 'rich' folks he berated on his bus tour earlier this week.  Americans are not stupid, they hear the talk that 'jobs' are the priority, but instead, they see self-serving politico's living the good life while providing lip service to the unwashed masses.