Dow Takes Another Tumble

In the aftermath of Thursday's meltdown, traders were likely happy to see the week come to an end. However, instead of a "dead cat bounce" or bottom fishing, which would likely occur in a normally-healthy market, stocks took another hit on Friday. In the absence of a late-day short-covering rally, the damage would have been far more severe.

Dow 11,346.51 -106.91; NASDAQ 2,315.63 -5.74; S&P 500 1,278.38 -4.77; NYSE Composite 8,623.51 -17.23

As it was, though the NASDAQ, S&P and NYSE Composite took only minor losses, the Dow was battered once again, led lower by a variety of consumer and banking stocks, including JP Morgan Chase (JPM, -1.27, 35.05), Home Depot (HD, -0.64, 24.02), Proctor Gamble (PG, -1.76, 60.49) Citigroup (C, -0.42, 17.25) and Coca-Cola (KO, -1.38, 51.84).

In general terms, the pillars of American consumerism are crumbling.

What's disturbing is that prices are at record highs for just about anything and everything, be it edible, reusable, financial or energy-related. The only thing not going higher in price, it seems, is real estate. The good news is that high prices are unsustainable without a solid consumer paying good money.

This is all the likely end of globalization. Wages and prices for Americans had to come down, while those of other less-developed nations had to rise. The final piece of the puzzle is a recession in the United States which drops prices to a level commensurate with already-lowered wages.

And it will happen. It has to. Average working people in America cannot continue to exist without savings, spending every last dollar on just food and energy, living paycheck to paycheck without any hope for the future. A seismic shift in the world economic system is about to take place. Many corporations, many of them standards in the worldwide consumer market, are going to stumble. Some will actually crumble and be pushed out of existence within the next two to five years. Profit will be squeezed for the simple reason that there simply is not as much money around to spend on various goods. Necessities come first. Then there are video games, vacations and the comforts of life.

Declining issues once again led advancers, 3862-2455. New lows soared over new highs, 895-89. There is every indication that the bear market is only now picking up steam and another 15-25% will be shaved from prices over the coming 6-18 months.

The recession, which many are denying out of warped statistical data, is inescapable and now upon us. All that's left to complete the cycle is a full shakeout in equity markets and a decline in commodity prices due to slack demand. Only then will economies and investments make sense.

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While all of this makes perfect economic sense, those trading oil and precious metals are not currently on the same page, but they are due for a very rude awakening as those asset bubbles collapse in coming months.

Crude oil was up another 57 cents to a new record of $140.21 a barrel. Gold tacked on $16.20, to $931.30. Silver gained 49 cents to $17.71. Like everything else that's traded on this planet. These prices have gone up and they will come down.

Volume the past two days was very heavy, reflecting a general exodus out of stocks of all kinds.

All in all, this was probably the best week the market has had in many years. Investors finally are being forced to face reality, and while it is harsh, it does have a certain cleansing effect.

NYSE Volume 2,204,843,000
NASDAQ Volume 3,167,387,000