An hour before the close of trading last Wednesday, the S&P was in the mid-1250's and looking poised to run higher into the end of 2011. With stocks down more than 5% in the last three sessions, most traders are just praying for New Year's, with or without a rally.
Today was a reminder that the market decides what is and isn't "priced in." U.S. stock futures were down nearly 2% well before sunrise and the bloodbath continued all day. The Dow Jones Industrial Average (^DJI) dropped more than 2% to 11,547 while the S&P 500 (^GSPC) fell 1.87% to 1,192. The Nasdaq Composite (^IXIC) slipped 1.92% to 2,523.
If you want one take-away from today's selling it's this: Mr. Market tends to throw tantrums when he's forced to wait. For what it's worth I'm looking to buy on a vigorous washout, if and when that panic selling comes. 1,150 on the S&P 500 seems a logical entry point but I'm looking for a certain mood more than a price. This selling is just the same old fear with a slightly different cast of characters.
What, exactly, does a panic sell-off look like? Let's just say you'll know it when you feel it in the pit of your stomach.
The headlines driving markets lower today were all predictable. The "Super Committee" failed to find a compromise solution for spending cuts. The eurozone took another step toward fiscal anarchy. Moody's says it may downgrade France if things continue to erode, which is obviously going to happen. The Chinese Vice-Premier warned that he expects a deep global recession.
"What's the surprise?" asks my partner Matt Nesto in the attached video. "The Super Committee that was set-up to fail, designed to fail, did what they were supposed to in that regard."
Any person with even a rudimentary understanding of European history knew the eurozone was doomed, Moody's repeated well-known concerns and the Chinese seem to be the last government on Earth to acknowledge the risk of global recession.
It's often said that "markets hate uncertainty." Days such as this prove the market isn't crazy about certitude either. "Good news doesn't have a leg to stand on," is how Nesto puts it and who would I be to argue? The Big Man's negativity at higher prices was obviously warranted.Read More »from Stocks Slide: Time to Buy or Run and Hide?