Financials took a massive beating today after Wachovia downgraded Goldman and Goldman put Merrill and Citi on its conviction sell list. The VIX spiked up a bit but is still well off the 35ish level that market the last market bottom. Oil rallied strongly late in the day along with natural gas. Like I said earlier, you have to be mighty brave (and a nut) to short oil here. Oils now higher than the current highs of the consolidation range. We'll have to see if those levels can be held tomorrow. Short term yields fell hard and the SHY continues to move higher as traders reduce bets that the fed will hike rates and investors flee to safer assets. It seems to becoming more clear that financials are still in trouble, the consumer is spent up and might be jobless soon, and housing prices continue to fall.
The DJIA is now below its "Bear Stearns" lows. After the BKX and HGX indices (Banking and Housing) failed to hold their Bear Stearns lows, I guess it was just a matter of time before this occurred. The S&P is around 8 points off the low currently and should find its way down there soon.
I think its foolish not to cover some shorts with a rout like today (see previous post), but things still look quite negative. As long as oil continues to move up and bad news clobbers the financials, you'll have a downward trend in the broad market.
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