Friends
First, just wrapping up the action in August, we saw the Dow drop about 6.5% while the S&P was down about 6.25% for the month. Well, September didn’t start much better.
I hope you didn’t feel like last week’s rally off those Monday lows meant that the correction was over and we were in the clear. Most likely that just isn’t the case. These things simply aren’t resolved that easily. During our conference call last Monday we were asked if this is the dreaded “correction”. We responded in the affirmative. Once levels of support have been breached and new lows are recorded, a test of those lows is likely, if only to confirm that they now represent new support levels. On the flipside, support levels that were violated on the way down become resistance levels as stocks attempt to move back up.
This leads us to today’s action. Once again, bad economic news out of China sent markets down overnight and our futures into a frenzy. Stocks opened down nearly 300 Dow points and spent the rest of the day probing lower prices. By the close, the Dow Jones Industrial Average was down 469 points to finish the day at 16,058. The S&P 500 was down 58 points to close at 1913. Gold was up $7 to trade at $1139 per ounce, while oil …, well let’s talk about oil. After the more than 25% counter rally move of the past few sessions, WTI gave back a big chunk of those gains in today’s session, losing $4.04, or more than 8%, to trade at $45.16 per barrel. To add to the pain Conoco Phillips announced that they were going to lay off 10% of their global workforce, or about 1800 jobs lost. Needless to say, the pain in the oil patch hasn’t ended yet either.
On the economic front, both the ISM Manufacturing Index and the PMI Manufacturing Index were just ok, but auto sales, led by Ford, actually were very good. Of course, on the domestic economic front this week is about Friday’s jobs report, but before we get there, let’s see what the ADP private payroll number is tomorrow.
Once again, whatever we are in the middle of, whether a “correction” (down 10 % or more) or if it becomes a bear market (down 20% or more), it is part of the normal course of action over the history of the stock market. Sure, it is painful while it lasts, but volatility is the price to pay for long term growth. Each and every time stocks have fallen, they have eventually risen to new highs. Once again to revisit/test recently seen lows is not unusual. Whether they hold or not will determine just what we are dealing with at the moment. Stay tuned and we’ll see how the jobs data affects things as the week unfolds.
Have a nice evening everyone.
