With the DJIA closing down 41, and the NASDAQ down 23, the big question remaining is this the beginning of a big correction. The answer comes in the technical readings of the market.
For now, we will assume the market is going through an overbought corrective phase if the major market indexes can hold above these levels:
S&P 1240-1250
DJIA 10,700-10,750
NASDAQ 2200
A significant break below these levels will signal a more severe break to the downside.
Over the past few months, I wrote that I would be holding a large cash position above 1250 on the S&P, and 10,800 on the DJIA. If the markets happen to rally to the top end of our projections, we would simply dollar cost average into our hedge positions (Rydex Tempest 500- RYTPX).
Here is the upside target:
S&P 1300-1350
DJIA 11,000
NASDAQ 2500-2600
Today's Market
GM rebounded back above $20 after a top fund manager, and stock picker, Craig and Don Hodges revealed the GM is "a real contrarian play". I agree. There is definitely too much pessimism around GM.
Craig Hodges said the troubled automaker is down because some investors fear the company could file for bankruptcy protection. "Hodges instead sees an eventual turnaround. The fund has about a 1% position in General Motors, making its initial purchase at $18.99 a share".
Even investing legend John Templeton has always said that investors should buy into maximum pessimism.
The Google (GOOG) bubble may have popped after the company was downgraded to a "sell" rating by Standard & Poor's. The stock fell $21.97 per share to close at $444.91.
For the day, disappointing earnings reports from tech bellwethers Intel (INTC, 25.52) and Yahoo (YHOO, 40.11), pushed the markets lower. Also, a trading halt in Japan spooked the markets after the Tokyo exchange had to close 20 minutes early due to high volume and panic selling.
At the close:
DJIA: 10830.02, down 65.14
S&P 500: 1274.01, down 8.92
NASDAQ Composite: 2271.60, down 31.50
