Unless the SPX gets a tremendous bounce tomorrow morning and can trade above 1220 then the prospects for another move down are probable. The intraday move down this morning found support at 1200 and as we mentioned yesterday there is also some support in the 1775 area if it falls below that.
The market seems like it's dying to put in a bottom but if it continues to put in lower closes and this time below 2006 and 2007 support levels it will have to wait.
Bias is still down -- really seems like it's going to need a significant VIX spike to do it, not the weak move to 30 that we had this morning. More pain seems due before a bounce develops.
SPX Weekly Chart: 2006 and 2007 support broken
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Definitely not good if one is invested long.
It was the yen carry traders selling oil, USO, to take profit, and the financial stocks selling off that propelled the S&P lower.
Today, the yen carry trade unwound, much like a year ago, in fact almost to the very day, on growing concern over the financial sector, and in particular concern over mortgage backed securities, as yen carry traders took profits on oil, USO, which fell 4.3%. Kevin's Market Blog reports that it was the largest drop since the gulf war.
It's risk aversion to the level two assets and level three assets at the banks, KBE, and investment bankers, KCE, as well as confidence over the Federal Reserve's effect and also authority to effectively capitalize and guarantee the two mortgage GSEs, Freddie Mac, FRE, and Fannie Mae, FNM, which each fell 26% today, that was the impetus for today's stock market sell off.
The barometer of the yen carry trade, EUR/JPY, FXE:FXY, gapped 1.2% lower on opening to close at 1.673. The chart of FXE:FXY weekly shows the current exhaustion of the yen carry trade.
The yen, FXY, rose 1.2%, the Euro, FXE, fell 0.1%, and the Aussie, FXA, rose 0.7%.
Gold, GLD, rose 0.3%, even though oil, USO, sold off 4.3%, indicating that an investment demand for gold is underway.
Because of many investment market dislocations, weaknesses, and multiple systemic risk potentialities, one may not have immediate and full access to one's wealth in brokerage accounts and in money market funds in the near future, that is at the time of a systemic risk event: I recommend that one invest in the gold ETF, in a trust account (not a brokerage account) this next week, as well purchase gold at both BullionVault.com and GoldIsMoney.com.
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