It turns out that our suspicions were correct about yesterday’s rally – a mere headfake. But today’s action was extreme and honestly, this type of action could lead to a panic sale of stocks across the board – those with fresh memores of 2000-2003 Nasdaq bubble crash will automatically make a connection with it to today’s market environment. While it would make sense for us to get a market bounce tomorrow, especially considering that we’ve sold off over 7% this week alone, the problem is, that we are not seeing typical selling. There will be many that can no longer stand the pain and as a result cut their losses and run for the hills.
Ideally though, this is the best case scenerio for the markets; get the Fed out of the way, and let the free markets sell-off until it has finally flushed out the financial problems that this market is dealing with. Then, and only then, will a bottom be formed. But if I am guessing (and this is nothing more than merely guessing), I say we see continued selling, that will allow for the ‘weak-hands’ to finally be taken out.
Here’s the Nasdaq and S&P charts…
