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S&P 500 down 3.45% as investor flee stocks

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Stocks are experiencing what looks to be "non-discriminate" selling as the broader market averages experience declines. One sign of "non-discriminate" selling is what we see in the Gold/Silver Index (XAU.X) 73.56 -3.5% which has been showing a gain, despite the underlying commodity futures for gold showing gains with December Gold futures (gc02z) at $322.20 +1.25%. In essence, stock bulls want out of stocks and it looks like they want out at just about any cost.

Further hint at just how bad equity bulls want out is the Market Volatility Index (VIX.X) 42.28 +10.3% spiking to levels not seen since just after the terrorist attacks of September 11th. On September 21st, the VIX jumped as high as 57.31, before the S&P 500 Index (SPX.X) found its September 21st relative low. An investor/trader following the VIX senses a bottom may be near in the broader equity markets, but would only make small bets at current levels.

The Dow Industrials (INDU) 8,419 -3% have come back from their prior lows of 8,244 as Home Depot (NYSE:HD) $29.38 +0.99% and Intel (NASDAQ:INTC) $18.05 +0.38% try and hold gains. Other Dow components aren't as fortunate as American Express (NYSE:AXP $32.72 -6.4%, Du Pont (NYSE:DD) $40.68 -6%, Johnson & Johnson (NYSE:JNJ) $47.67 -5.7% and Hewlett Packard (NYSE:HPQ) $14.42 -5.5% experience selling.

Volume is rather heavy with the NYSE Volume reaching the 1.5 billion level and the NASDAQ Volume also achieves the 1.5 billion mark.

Breadth on the NYSE obviously negative with decliners outnumbering advancers by a 5:1 margin, with breadth still negative at the NASDAQ, but to a lesser extent at 3:1.

New 52-week lows versus 52-week highs as bears in control here. On the NYSE, 339 stocks have hit new lows versus just 34 new highs. On the NASDAQ, 235 stocks are hitting new lows, while just 17 stocks have broken to new highs.

Treasuries are actually finding modest selling as YIELDS across the major maturities edge higher. The benchmark 10-year YIELD is edging up at ($TNX.X) 4.620%, but selling their is suspicious near-term as the US$ Index (dx00y) $104.62 -1.19% sinks to new lows. The concern for broader-market equity bulls here is that foreign investors aren't only selling their U.S. equity investments, but may be starting to liquidate some of the Treasury investments too.

One reason this may be of "concern" is the underlying bid in gold futures, which may hint that investors are discounting some type of negative event, which would have gold bullion the "investment" of choice under some type of currency/debt crisis.

Jeff Bailey
Senior Market Technician
Option Investor

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