A controlled descent today...

Stocks stayed in the red throughout the day and we finally closed with Dow loosing 188 points, about -2.36 %.


The market broke Friday's lows and added to its early morning losses throughout the day. There was a brief attempt to rally during the first 90 minutes but when that failed we continued to go south until the last hour of the day. The major indices erased some of its earlier losses during the last hour and the Dow finally closed just slightly above its lows.


What soured the mood for the day was the IMF's assessment that US banks have only recognized about 50 % of their toxic assets thus far. (IMF estimates total toxic assets of 4 trillion as opposed to 2 trillion having being considered toxic thus far)


Bad news...no question about it. However, the market took it rather well and instead of entering a full blown sell off we witnessed a rather controlled descent. This is good news since the missing downside volatility suggest that the current decline in prices will run out of steam without causing to much damage.

Today's decline also happened on rather low volume. As such there seems to be a lack of conviction to press the downside to aggressively.


The Dow should test the 7500 level and, if it holds, make its way back. A sharp break below 7500 would indicate that the current decline might become more of a sell off and then my best guess is that we will hit at least 7150 at which point some stabilization in prices seems very likely.


I do not believe that we will reverse course tomorrow and head significantly higher. However, an upside break above 7980 in the Dow would change my opinion and lead me to believe that the recent uptrend has resumed. Conversely...as long as the Dow stays below 7980 I expect further selling pressure and declines.

Until tomorrow.

Steve Benger

PS: Easter is coming up and as such volume and volatility should decline for the rest of the week.