Stock Market Crash 8-4-11

Stock Market Crash 8-4-11

Epic day for the markets. Early morning copper turned red signaling that the markets would have a weak day ahead.  The ECB left rates unchanged, Trichet turned form a hawk into a dove but worst of all, he set out to confuse the markets by talking jibberish and avoiding tough questions.  This only created confusion.  Sadly, it appears that Trichet made a mistake in raising rates this summer just as he did in July 2008.

Once the euro weakened, the following asset relationship took hold; euro down=dollar up=commodities down=equities down=treasuries up (yields down).  Gold was the outlier early on placing another high top but then rolling over to join the rest of the commodities as the day progressed. The shocking stat today was that the smaller holders of GLD had tripled in recent months.  This shows that the larger gold traders are distributing to Joe Six, the bag holder that typically shows up at the top.

The game changer today occurred when the utilities collapsed.  Watching UTIL, the 418.37 level identified where the multi-week uptrend would be stopped, and this morning that level failed, breathing negativity into the indexes.  The killer blow today came at the 2 o'clock hour when the UTIL lost its 50 week MA, a level that many of the algorithms track in their programs.  Once that level gave way, the indexes were in big trouble and went into free fall into the close, as was expected.

Where does this leave the markets?  Since the smoke continues to clear tonight, it is best to wait for the jobs report in the morning since that occurs before the open anyway.  This day was historic. All of the sectors tracked by Keystone's algorithm are bearish. The only silver lining is that the selling has been so relentless and the indexes are beaten so hard that a snap back rally should occur to give everyone a chance to catch their breath.

The Bradley major turn date of 7/29/11 and 7/30/11, which opened a window from 7/22/11 to now for a major market turn to occur, was dead on.  Even the eclipse technique that was targeting a window of mid to late July for a large market sell off can be credited for some effect at ushering in the market negativity.

We watched Keystone's secular market signals turn this week as well providing further indication of the seriousness of this down move.  Despite any snap back rallies, these secular signals say the stagnation and weak markets will continue into the weeks and months ahead.

CPC put/call closed at 1.31, over the 1.2 level, and fully consistent with wanting to see a bounce now.  NYAD at -2800 is outrageous, the lowest number seen in ages, a snap back rally would be expected from this number.   NYHL at -247, these numbers are surprisingly low, a bounce back would be expected. We will see what the jobs report says in the morning.

Major Index Summary:  The SPX was down 60 points, or 4.8%.  The Dow Industrials were down 513 points, or 4.3%. The Nasdaq Composite was down 137 points, or 5.1%. The NYA was down 425 points, or 5.4%. The RUT was down 46 points, or 6.0%.