Since the high's of the day when Obama got elected, the Dow Jones Industrial Average has dropped by 22% to this morning's lowest levels. We are now at a juncture where, if we finish the day at or near the low of this day, we could see the start of another severe fall in the stock market. We have already lost 45 percent in the value of the market since October 2007. Today's market activity puts us at risk of breaking through the previous floor that was seen on a single day: November 24 of 2008.
The risk of further erosion in the market could be lessened if the market finishes substantially higher by the end of this day. That would be what is known, technically, as a "single day reversal." Even if today finishes at a low, tomorrow could signal a bottom by recovering at least 66 percent of today's losses. That, too, is a form of market reversal. However, all bets would be off if we have a down day today, and it is followed by losses again, tomorrow. This is a critical day to anyone who follows the stock market using any form of technical analysis.
Obviously, the investment community had a weekend to mull over the Stimulus Package and today's market activity reflects it.
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