TUES. SEP. 30 - The "Why" Behind The Largest DJIA Point Drop In History

As noted in this space yesterday, “(Monday) could be a very scary day.” Well, it was. Why? Why did yesterday happen? Why do the markets keep falling? Most people truly have no comprehension, understanding, or knowledge of what is going on. The credit markets are ostensibly frozen. Nobody can get a car loan. Nobody can get a mortgage. Big entities like banks (Wachovia the latest) to much smaller entities (like five gas stations in a one mile radius of my house) are simply being swallowed or worse- completely shutting down. There has been a tremendous amount of politicking in DC in particular, but all over the place over doing something about it. And really? What else is new? But there is no crying wolf this time. It is not for anybody at Protrading Network to debate the merit of free market economics. So we won’t. But it is indisputable simply by studying the numbers that a bank run at Wachovia (WB) as a simple example that the system is in trouble. WB has $300 billion in loans, $53 billion in debt, and an estimated $42 billion in losses on the loans. The FDIC has an estimated $43 billion left in it. Therefore, any bank run would have depleted the FDIC without the entity opening up taxpayer coffers and would have set up bank runs at other places as people panicked. So, whether the compromised government plan is right or not- although it will take a LOT more than $250 billion in an immediate-term funding to fix this- yesterday shows something MUST be done IMMEDIATELY. Banks are scared to lend, real estate prices are crashing, and goods are sitting at port because entities cannot get credit to ship (look at Dryships- DRYS which has declined 75% in the last few weeks). It will NOT get better until/unless SOMETHING is done to spark hope…and if it does not happen soon, Dow 10000 will be a very distant memory for a long time to come.

The markets are bouncing this morning following the panic selling on the close yesterday as denoted by the watch list below on all those imbalances. So, the markets would be expected to have a slight bounce to offset the unmitigated declines. Also, there is a renewed sense of hope that something will be done in Congress this week. And as was denoted in "The Shawshank Redemption," hope is a good thing. Look for very thin illiquid rumor-driven trading today albeit slower than yesterday as many market players will be away for the bulk if not all day because of the Jewish holidays.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 based on direction of the market unless specified

Lots of imbalances again:

Good-

Either buy thru unch or A-B-A2 to downside because these were all artificially high closes:

FED – rallied 1 ¾ on close

HEV- rallied 1 ½ into close

HTM- rallied 70 cents into/at close

VSE- rallied 60 cents into close and another 90 cents on close

VLNC- rallied 60 cents into close

Bad-

Either short thru unch or A-B-A2 to upside because these were all artificially low closes:

GOOG- broke 10 points on the close; 381 artificially low close.

STT- broke 4 on the close; 44 very low close

BK- broke 3 ½ on close

WFC- broke 3 ¾ on close

C- broke 1 ¼ on close

JPM- broke 4 on close

GE- broke 1 on close

BAC- broke 1 ¾ on close

MER- broke 1 ½ on close

SPWR- broke 15 on close

COF- broke 3 ½ on close

PRU- broke 4 on close

NTRS- broke 7 on close

ZION- broke 4 on close

COMV- fell 60 cents on close

CELG- fell 6 on close

FCEL –fell 60 cents on close

GILD- fell 2 on close

HCBK- fell 1 ¾ on close

FITB- fell 1 ½ on close

CME- fell 35 on the close…yes, that’s right…35.

DTV- fell 2 on the close

TROW- fell 6 on the close

PNC- fell 2 on close

CVX- fell 2 ½ on close

AFL – fell 4 ¾ on close

DDR – fell 3 ½ on close

AXP- fell 2 on close

TRV- fell 6 on close

UNH- fell 3 ½ on close

MET- fell 3 ¼ on close

MI – fell 2 on close

BBT – fell 5 on close

PNX – fell 1 ½ on close

SOL – fell 1 ¼ on close

CNO- fell 80 cents on close

RF- fell 1.75 on close

AMTD, ERTS, AMGN, EBAY, DELL – among the many big cap NASDAQ stocks that closed on their lows on huge volume

PGR, CB, MIR, EP- among the insurance and utility companies belted…all closed on their lows

Oils/metals, et al- all ravaged yesterday


Good luck today.

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