Too Far, Too Fast: Stocks Pull Back

Less than a day after Americans election their first African-American president, Barack Obama, investors took a cautious approach, taking recent profits and heading for the hills.

This day was by no means a referendum on Barack Obama. Stocks were stretched thin. As of Tuesday's close, the Dow was up a full 1450 points off the October 27 lows, just 6 short sessions ago. That's an 18% gain, hardly sustainable. A retest of the 8175 low must occur and will likely happen within the next three weeks. Stocks may actually take another hit in December, especially if retail sales slump at the start of the holiday shopping season.

Tax-related selling may also be an issue, though one cannot imagine much selling to lock in what are most assuredly losses at this juncture.

Wednesday's loss of 5.1% was the largest percentage drop on the day after a presidential election in Dow history. On Nov. 8, 1932, the day after FDR defeated Herbert Hoover for the presidency, the Dow fell 4.5%.

Dow 9,139.27 -486.01; NASDAQ 1,681.64 -98.48; S&P 500 952.77 -52.98; NYSE Composite 6,012.17 -332.92

Market internals struck a rather somber tone, with losers beating out gainers, 5037-1286. New lows were achieved by some 154 issues. Only 7 posted new highs. Volume was moderate.

NYSE Volume 5,524,001,000
NASDAQ Volume 2,201,961,000

Oil took another nose dive, losing $5.23, to $65.30. Gold lost $14.90, to $742.40, while silver gained 33 cents to $10.46.

One should refrain from reading too much into the figures over the next few days, as they are likely to be dreadful. More and more firms continue to release earnings reports and forward-looking guidance that is spooking some investors. Still others are in the process of announcing or executing job cuts. Preliminary reports say that Friday's Nonfarm Payrolls report could be a stunner, showing a massive 200,000 jobs lost in October.

Beware. We are still in a falling stock zone. 8000 could easily be shattered on the downside in coming days and weeks.