Wednesday, November 21, 2007

Dow Pounded to 7-Month Low

In a wild, pre-holiday session on Wednesday, the Dow Jones Industrials, with all other major indices in tow, crashed through near-term support levels and closed at a 7-month low.

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The April 17 close of 12,773.04 was the last time the Dow closed below 13,000, leaving the blue-chip average up just 336 points for the year, or just over 3%.

The NASDAQ and S&P 500 closed at a 3-month low, the NASDAQ just 20 points above the lows registered in August, while the S&P ended 10 points higher than the August 16 low. While the NASDAQ is still trading up 4% for the year, the S&P fell into negative territory for 2007. The widely-watched average closed at 1418.30 on December 31 of 2006.

The NYSE Composite Index, the broadest measure of stocks, remained well above the August 16 low of 9,087.10 and remains in positive territory for the year.

Dow 12,799.04 -211.10; NASDAQ 2,562.15 -4.66; S&P 500 1,416.77 -22.93; NYSE Composite 9,405.22 -170.07

The decline on the Dow was the 5th session registering a loss of 200 or more points and is perilously close to being technically in a correction (down 10%). From it's high, the Dow would have to close below 12,748. Unless Wall Street investors are capable of pulling multiple rabbits from their hats, the Dow will be in a correction by next week.

Credit fears continue to dog the markets and soon the consumer will take center stage, as the holiday shopping season commences on Black Friday, the day after Thanksgiving. Prospects for a buoyant Christmas season are dim for many retailers, who see consumers as tapped out and spending less due to high gas prices, fears of an economic downturn and housing woes. Credit card debt is at an all-time high and more consumers are using credit cards for everyday purchases, an ominous sign.

Measuring market internals, declining issues outpaced advancers, 4578-1788. New lows rang in at 876, with only 67 stocks marking new highs. Both the gap between the new highs/lows and the minuscule number of new highs are alarming and sending strong sell signals.

The price of a gallon of oil remained persistently high, although crude lost 74 cents to $97.29. Gold was up $7.20 to close at $798.60, while silver slipped 8 cents to $14.42.

With all the turmoil and volatility in US markets, the final five weeks of the year should pose significant problems for investors. Adding to the woes of an already troubled - and increasingly skittish - market are concerns about year-end tax selling in addition to what appears to be an uphill climb for retailers this holiday season.

With Thanksgiving tomorrow, investors are probably thankful they still have the opportunity to trim losses, though finding stable stocks to purchase may be a challenge.

NYSE Volume 4,141,169,750
NASDAQ Volume 2,079,205,875

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