Will Capitulation Continue Today?

Yesterday was a classic day of capitulation. All sectors, all industries and 99 of the Cara 100 were trounced. In fact 24% of the high-quality Cara 100 dropped more than 10.0% on the day. Today will start out on the same course.

For the DJIA index, the first hour was fine, and then there was a spike down for an hour, followed by side-tracking for most of the session until about 3:15pm. The final 45 minutes was a killer, once again. There is no confidence in the market as traders are waiting for another shoe to drop among the big banks.

In NY, the worst hit sectors were the Banks ($BKX -11.1%) and Broker-Dealers ($XBD -12.7%). Zero right into this sector to see where the market problems lie.

Among the big banks, the worst hit was Citigroup (C -23.4%). GE Capital pulled GE down -10.0% on bigger volume.

At the close, the DJIA (-427 -5.07% to 7997.28), S&P 500 (-52.54 -6.12% to 806.58) and NASDAQ Composite (-96.85 -6.53% to 1386.42) were all hammered.

In Canada, the Toronto Composite dropped -345 -3.91% to 8490.56, while the Venture Board was down -20 -2.69% to 730.09.

In NY, the leading sectors were Utilities (XLU -2.1%) and Consumer Staples (XLP -2.6%). That was the best of the lot. Financials (XLF -10.5%) was by far the worst.

The extreme traders in the Cara 100 were, for the winner (yes, just a single gainer on the day) ABX +0.3%, and the losers, Brunswick Corp (BC -19.5%), which had the day before been up +20.2%, which shows only that traders are playing the NYSE like a casino.

The US long bond ($USB) gained +1.61% to 122.09, which represents a yield of under 4%. Yields plunged yesterday. T-Bill’s were yielding just 0.065%, which further underscores the degree of risk aversion in the equity market these days.

On the forex front, the $USD was up +0.54% to 87.67. The Euro was down -1.11% to 124.88. The Pound -0.06% to 149.56 was unchanged, but the Yen +1.30% to 104.31 and the Loonie -1.80% to 79.72 were extreme movers.

$GOLD lost a bit to 736.00 (-$2.20/oz).

$WTIC (Crude Oil) lost -$1.75/bbl to 54.10.

Overnight, the Asia-Pacific equity markets were all hammered: the Shanghai Composite (-1.67% to 1983.8) was best off. The Japanese Nikkei (-6.89% to 7703.0), Hong Kong (-4.04% to 12298.6), Australia (-4.32% to 3332.6) and India (-3.68% to 8451.0) all traded lower on bank viability issues and economic recession concerns.

At 9:20am ET (vs 8:08am ET) today, the French CAC was down -3.26% (-2.37%), German DAX -2.69% (-1.69%), and UK FTSE -2.61% (-1.60%), which is worsening. Banks are continuing to pull equity markets down.

At 9:25am ET (vs 8:08am ET) today, the gold, palladium, platinum, and silver spot prices were: 742.20 (748.02), 180.5 (178), 796 (809), and 9.14 (9.37).

Crude Oil is weak at 51.20 at 9:15am ET, down from 52.56 at 8am ET.

The DJIA futures have dropped 7881, down from 7980 at 8:10am ET.

Comments & Outlook

I think we can finally say that this week represented the Trade of the Generation, which is to Sell bonds and Buy Gold/Goldminers. Today for bonds could be a major sell.

If there is a trader in the universe who has bought US treasuries for reasons of income rather than panic/safe haven, then there won’t be a second. How would anybody expect to make money in the 5-year Treasury yielding 2.09%? The 10-year yielding 3.39% and the 30-year yielding 3.97% reflect only the ridiculous prices as traders have panicked from other assets.

The $XAU goldminers index hit a high of 209 in March-08. Eight months later, the index was often in the 64 to 72 range. GG yesterday closed at 18.62. In late September it was double that. Within a year, this stock will likely be at least +100% higher than the close yesterday.

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