Disappointing Reversal


It was no real surprise that China announced new stimulus measures overnight to hopefully stem the tide of their stock market decline. As a matter of fact, we spoke about its likelihood in our conference call yesterday. Stock futures were rallying even before the announcement from the PBOC, but tacked on more gains by the opening of trading. The Dow rallied more than 400 points by mid-morning but had trouble hanging on to those gains as the trading session wore on. By the close, the gains had totally evaporated and turned into losses.

By the close, the Dow Jones Industrial Average was down 204 points to finish the day at 15,666. The S&P 500 was down 25 points to close at 1867. Gold was down $15 to trade at $1139 per ounce, while oil was up $.68 to trade at $38.92 per barrel WTI.

Today’s volatility is not surprising. Damage like we have seen occur the past few trading sessions is not usually erased in a day or two. Testing some of yesterday’s lows would not be unusual as corrections typically have to run their course and find support at some level. In addition, there has been plenty of psychological damage done, and that too can take some time to work out. Again, none of this is unusual and part of the process of going through a market correction/pullback.



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