by Patrick Wood, Editor

Market

Yesterday’s analysis was right on the money, but today’s sur­prise plunge exceeded normal expec­ta­tions. One lesson here is that in a bear market, sur­prises almost always happen to the downside.

Every­thing got wal­loped today. People are looking at the DJIA falling 268.32 points, or 2.61 per­cent, but the real story was in the NYSE Com­posite Index: It fell 3.62 per­cent! The S&P 500 fell 3.11 per­cent and the Rus­sell 200 Index dropped 3.45 per­cent. These fig­ures are close to being a full-fledged crash.

The NYSE breadth was stag­gering. There were only 283 stocks up while 2,896 were down. This is a 1:10 ratio, and extremely rare. Volume picked up today and over 94 per­cent was down­side volume.

Gold was clob­bered for a $48.6 loss, touching 1,058 at its low point. Accord­ingly, the AMEX Gold Miners index lost 5.62 per­cent. Gold bulls are really sweating, but there are no excuses big enough to explain away recent price behavior.

Today’s action was typ­ical (if exag­ger­ated) for a kickoff of a third wave. I think it has a long way to go before its com­plete, per­haps tracking down to as low as 9,181. This is a Fibonacci 1.618 times leg one, mea­sured from wave 2 on the chart.

The above chart shows the pro­gres­sion of the DJIA on a 15 minute interval. Note the cir­cled area at top ii — the red SRL that stopped the advance was based on the entire first leg down. The ensuing drop has unfolded in five waves, being thor­oughly impul­sive and stretching for the lower SRL. It is pos­sible that five waves down are com­plete, which would call for at least a small a-b-c correction.

Use any strength to estab­lish addi­tional bearish positions.

The dollar is streaking sky­ward, clearly breaking out into a new leg up. Don’t bet against it.