The Dow closed down 158 points, or 1.2% yesterday. The S&P 500 closed down 1.1%. The Nasdaq closed down 0.9%.
A 1% move isn’t much at all as volatility goes. Quite normal in fact.
But here’s why it was worrisome yesterday.
After holding up so impressively over recent weeks as the new year and all its potential problems approached, the market finally showed some fear yesterday.
As noted, a 1% move isn’t much as volatility goes. It was more the sudden dive at the close, with no typical attempt by the big firms to mitigate the decline going into the weekend.
Perhaps it was only institutions closing out positions before leaving for the holiday-shortened week with so many uncertainties coming over the next few days. It didn’t seem to be a wholesale bailout, as trading volume on the day was very low at just 0.5 billion shares traded on the NYSE.
However, after the cash market closed there was a worrisome big further plunge in the futures market, with S&P 500 futures plunging another 1.5%. That can change significantly before the market opens Monday morning. But still.
Fear even finally began to show up in the VIX Index (aka the Fear Index) yesterday.
Yesterday’s plunge shows up on the long-term charts as only a minor blip. But could the arrival of fear be the beginning of something more serious?
It will depend on politicians in Washington, and that is a legitimately scary situation.
To read my weekend newspaper column click here: It’s Only A Fiscal Slope Not A Cliff!
Subscribers to Street Smart Report: There are important intermediate and short-term charts and recommendations in the ‘premium content’ area of this morning’s blog. (The next issue of the newsletter will be out on Thursday).
Images: Flickr (licence attribution)
About The Author
Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!