Stock Market Takes a Historic Dump

Pre-market futures are down considerably this morning on Financial news that has traders focused on the half-empty portion of the glass. Citigroup is buying WB in another FDIC facilitated deal, which seems to be the trend these days. In addition, traders appear to be nervous over some elements of the $700b bailout that heads over to the House of Represenatives for a vote today.

I'm not going to play around with much early in the day, including Gold. It's getting very difficult lately to guage when the market is going to have a sell-off day, or when it's going to gap down and hold the line. Anything new that I do today will be intra-day on short swings. There's still too much uncertainty and chart violence for me to get really solid about a direction.

1:00 pm MT: This has been a violent day in the stock market. The bailout was shot down in Congress today. Here was the final vote: 207 for, 226 against with a total of 218 votes needed to pass. This was the breakdown of the vote: Democrats 141 for, 94 against. Republicans 66 for, 132 against. It was somewhat surprising to me that Nancy Pelosi was unable to get just 11 votes out of the 94 Democrats who voted against the bailout. It appears that the issue was the news that came out a couple of days ago that the bailout bill got “dirtied up” (which isn’t necessarily that surprising when politicians and money are in the same room together). From recent reports it looks like the bailout was restructured so that 20% of the potential profits from the bailout would be moved into the Housing Trust Fund, which is a slush fund for political action groups like ACORN and the National Council of La Raza. It also appears that this bill could be the genesis for socializing banks and pension funds, which would be a disaster to capitalism. I would guess that many Democrats and Republicans were highly concerned about the “corrupting” of the bailout language and voted against it. My only comment, which I am keeping politically amoral, is that it’s too bad that some politicians focused on their own self-interest and dirtied up the bailout so it had little chance of passing a vote. It appears that the market will have to correct itself, which isn’t necessarily a bad thing, it just means that some more Financial institutions will probably become extinct.....

4:00 pm MT: Market Wrap: Well, that’s over with.....

Dow 10,365.45 -777.68, -6.98%

SPX 1,106.42 -106.85, -8.79%

Naz 1,983.73 -199.61, -9.14%

The Markets are definitely Intermediate Term Bearish and Short Term Bearish.....This was the biggest one-day drop for the SPX since the dreaded 1987 crash. The Dow had its biggest one day drop in points ever. And the Naz actually had a bigger percentage drop than either of them.....and the Naz-100 actually dropped even more than that with a 10.52% drop.....

The major indexes are potentially setting up for a dead cat bounce off of an extreme oversold reading. However, the Dow doesn’t have support again until about 10,000 – 10,100, the SPX has its next support around 1,075 – 1,080, and if the Naz doesn’t hold key support in this 1,985 – 2,000 area it could drop to 1,900. The VIX hit 48, but that’s still 9 points below the 57 reading that ended the last Bear Market. So we could see a little bit more selling tomorrow, relatively speaking, before we see a dead cat bounce.

As usual, for directional trading, take this day to day and play the intra-day short swings. We had a violent day, which could get a little more of a tremor type of aftershock tomorrow before it tries to bounce a little. Any big news on the bailout would only add to the volatility.