Inauguration Day

While I was watching our 44th President being sworn in today last years damaging market volatility continued. Today we had the worst stock market decline in Inauguration Day history. The Dow crossed below 8000 declining over 4% and the S&P 500 closed at 805.22 down 5.28%. The NASDAQ closed at 1440.86 down 5.78% and the Russell small cap index closed at 433.65 and was down over 7% today. The financial sector as a whole was down over 16% today. Citigroup was down 20% and Bank of America was down 29% today. The Royal Bank of Scotland projected a massive 41 billion dollars in losses for 2008 and was down over 69%. Amid a global decline foreign currencies sold off in favor of the US dollar with which investors could buy US Treasuries as a safe haven. Also, gold retain its glitter as another safe haven where money flowed. We are in the midst of a black swan with several asset bubbles bursting at the same time.

How low can the markets go? We have to look at support levels and if they are breached we look at the next lower support level. We had a 4th wave from the November low of 741 to the January high of 943 on the S&P 500. We broke a support at the 857 area but held support today with the 817 low. If we break today's low the next target is the 741 low of November. My 5th wave target is for a low somewhere between 714 to 692 on the S&P 500 which is about 15% lower than we are now. Can we get there? Well anything is possible in the markets. We will just have to wait and see.