On Tuesday, investors sought safety as the many risks combined to create a period of uncertainty not seen in years. A shift in election polls — to the Republicans’ benefit — losses in crude oil, and volatility in the Treasury market caused a rush to gold while high-risk sectors took the brunt of a broad decline.
The S&P 500 fell 0.7%, and the Dow industrials fell 0.6%, but the technology sector fell 0.8%, and the small-cap-weighted Russell 2000 was hit with a 1% loss. Nasdaq closed at its lowest level since mid-September, down 0.7% for the day. Volatility, as measured by the CBOE Volatility Index (VIX), rose 9.2%.
The Treasury’s benchmark 10-year note fell to 1.822% from 1.834% on Monday due to a rush of buying of the notes. The dollar rose almost 2% against the Mexican Peso to 19.19 per the dollar.
At the close, the Dow Jones Industrial Average fell 105 points to 18,037, the S&P 500 fell 14 points at 2,112, the Nasdaq lost 36 points at 5,154 and the Russell 2000 closed at 117.05, off 13. The NYSE’s primary exchange traded 1.1 billion shares with total volume of 4.5 billion shares, and Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by 3.1-to-1 and on the Nasdaq, decliners led by 2.3-to-1. Blocks on the NYSE rose to 5,746 from 5,584 on Monday.
Yesterday much was made of the 9.2% jump in the VIX. But this increase in the “Fear Index” is nothing compared to the increases in January/February and late-June. Volatility could, however, increase to those earlier levels.
The exchange-traded fund iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) broke its support line at $118.13 yesterday, setting it up for a test of the April high at 115 and the 200-day moving average at $114.17.
Conclusion: There may be more uncertainty than most investors can absorb, but the markets haven’t broken down. Yes, there has been a mild correction and the S&P 500 (see Monday’s chart) even broke its initial support line at 2,115 by 3 points, but there is plenty of support between the break and the chart’s 200-day moving average at 2,079.
As for the IWM — again, lots of support from the close at $117 to the major support at the May and June lows at $108, including the 200-day moving average at $114.17.
If we see a rush of selling between the election and Dec. 31, be prepared to buy into it. Holiday bargain-basement prices could result in big gains in January.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
