Traders Find Fork in Road

Baseball's Yogi Berra is known to have said, "When you come to a fork in the road, take it," and traders did just that today, taking the low road out of Wall Street in a spirited afternoon selloff which saw the Dow drop 150 points in the final three hours of trading.

Since events such as this do not exist in a vacuum, some perspective may be gleaned from underlying currents in the markets.

Dow 13,489.42 -146.00; Nasdaq 2,599.96 -26.80; S&P 500 1,512.84 -0.86; NYSE Composite 9,905.08 -121.44

While the pain was spread somewhat equally over the 30 Dow stocks, with only 5 issues showing up positive, two commodity-based companies, Exxon-Mobil and Alcoa, were the biggest losers. This coincided with a fairly significant sell-off in oil futures on higher supply figures and actually makes more sense than the ersatz argument that a slight rise in interest rates (the 10-year note was up a measly 0.037 to yield 5.14%) was the cause for today's decline.

Any indication that the oil tyranny is meeting resistance would be welcome news, but that barely fits today's declines. While oil fell 91 cents to close at $68.19, futures dropped as low as $67.35 during the day. Those numbers are still likely to be about $15 above reality, put in place by sheiks, and monopolistic traders who have kept the price of crude artificially high for better than two years. To say that the oil futures markets are not even partially rigged is tantamount to saying no baseball players ever took steroids.

So, what actually moved the markets today? Like a well-orchestrated ballet, this was probably organized selling at the highest quarters of the trading spectrum and may be only the beginning of a long unwinding of positions in blue chips and large-cap stocks.

While the numbers show a broad selling mood today - declining issues were 3-1 winners over advancing ones - there was little movement in the high-low metric. There were 374 new highs and 124 new lows, indicating that most stocks making recent moves were not affected and that the selling was concentrated simply on dumping perceived underperformers.

It bears watching whether this selling - on solid volume - will spill over into all issues and continue. The markets are more than ever on the look-out for a significant correction, especially with the Fed meeting next week to take a long look at base interest rates.

Traders may be forced into a position that the stock market indices cannot move forward without a few steps back, and it may be that the sluggish nature of the past few weeks is a precursor to a larger dip. With the potential for a recession slight, a correction would send a message that the markets are essentially sound and worthy of re-investment. The short answer to today's trade is that investors were freeing up cash for the next round of buying.

Yes, gold and silver were hit again today. If you don't like gold at $660 per ounce and are holding, you're likely to like it a lot less at $580. Bulls don't run forever, and the gold (and silver) bull has developed a noticeable limp.