After hovering near the lows of the session through the New York lunch hour and into the early afternoon, the market broke intraday support and steadily lost steam for the rest of the day, turning what was originally an ugly day into an absolutely dismal trading session. Breadth was right at 5:1 to the negative, volume was heavy, each sector finished in the red and the indices fell 3.9%, on average, leaving them barely above Monday’s close.
Of course, the interesting thing is that the losses came despite the fact the Senate passed their own version of the bailout bill and sent it along to the House. Given the negative response, it would seem that the market has moved past hoping that the government will provide a solution to the mess in the credit market and has instead turned its attention to the likelihood that we are heading into – or are already in – a deep global downturn.
Meanwhile, we have the employment report to contend with tomorrow. The last two reports were much worse than expected, and we suspect that another disappointing reading will not be taken kindly.
Still, as we’ve been saying, the silver lining in all of this dismal action is that this market is finally doing the necessary work of pricing in the very real consequences we are feeling as a result of the collapse of the housing market. At some point, this bear market will come to an end, and we’ll be able to start buying stocks again, but until then, we need to make sure our capital is safe and keep out of the way of this very nasty bear market.