Stock market, commodities plunge

As I wrote yesterday's column, the pace of the selling afterhours had slowed compared to the immediate aftermath of the Fed news. This created potential for some upside recovery into Thursday, but at the time there was no setup for such a move developing and the door remained open for further downside, albeit at a slower pace than late Wednesday afternoon. As Thursday began, we had yet to see any setup development for recovery action. Instead, the 15 minute 20 period moving average continued to hold and the index futures continued to sell off. As anticipated, the pace of this selling was slower than the previous afternoon, however, the magnitude was much greater. The indices skidded down the 15 minute 20 sma, but the selloff left the Dow down more than 500 points by late afternoon. It was only profit-taking and repositioning in the final thirty minutes of the day (the final correction period) that saved it from such a fate at the closing bell.

The index futures continued to recoup some of the day's losses afterhours, although the pace has been slow to begin with. On the 30 minute charts, however, the indices are still oversold and have room to continue to recover at least some of the week's losses prior to the weekend kick-off. Expect any upside action on this time frame to be more gradual than the selloff this week.

S&P 500 (Figure 2)

Index Results

The Dow Jones Industrial Average ($DJI) ended the day on Thursday with a loss of 391.01 points, or 3.51%, and closed at 10,733.83.All of the Dow's thirty index components posted a loss. Verizon (VZ) was the only one that did not post a loss over 1%. The top decliners were United Technologies (UTX) (-8.76%), Caterpillar Inc. (CAT) (-6.88%), Alcoa (AA) (-6.73%), and DuPont (DD) (-6.64%). Hewlett Packard (HPQ) CEO Leo Apotheker was ousted on Thursday, replaced by former eBay CEO Meg Whitman. Despite gains on Wednesday on speculation of the news, shares were lower by nearly 5% of the day and slipped further afterhours.

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