5% in a week, are you kidding?

Not since 1932 had the markets suffered such a sharp decline the week of Thanksgiving. Although volume was relatively light, the Dow Jones Industrial Average (chart) on the week fell 564.22 points or 4.85%, the Nasdaq (chart) -130.92 or 5.1%, the S&P 500 (chart) -56.98 or 4.7% and the Russell 2000 (chart) -50.64 which was a whopping 7% decline.

In today’s world, we do live in a global economy, but are we that tied to Europe? For weeks now every single headline that comes out of Europe seemingly jolts our market. What is being overlooked here by investors is the improving U.S. economic data points from the consumer, all the way through to the manufacturing sector. This is causing some analysts to revise up their future growth forecasts. However, market participants are fixated on when and what the European Central Bank will do to begin to solve the credit crisis in the Euro Zone. Until then, I would expect extreme volatility in our markets to continue.

This week also marked the break of the 50-day moving average on the S&P 500 (chart). Now, certain market technicians are looking for the 1150 level of the S&P to hold. Also, when you take a step back and analyze what has occurred over the past four months or so, what’s new? This market has been extremely volatile and has traded in a 16% or so trading range since early August. So as long as the S&P 500 or other indexes remain range bound, there can indeed be long and short opportunities at both ends of the range.

Have a great weekend 🙂