When the patient isn’t improving fast and the doctors are stumped, they order more tests.
The Dow Jones Industrial Average fell more than 300 points at the start of trading Tuesday to below 16,200, following following sharp declines overseas. Stocks in Asia and Europe falling more than 2% overnight. Even after bouncing hard off last week’s lows, the stock market has appeared unwell, with jumpy vital signs and acute sensitivity to new stimuli.
The latest setback in global markets following a weak Chinese manufacturing report - with stocks in Asia and Europe losing more than 2% overnight - will surely stir up calls that the S&P 500 (^GSPC) needs to “retest” the recent lows, which sit some 5% below Monday’s closing quote.
This is all from the standard the standard trading-desk playbook, which holds that true “V” bottoms are rare. Even though we pretty much got a flawless “V” last October, it’s more common to knock around the vicinity of market lows for a while to see if the lower prices attract strong-handed buyers – or not.It’s easy to get too caught up in the technical trader tactics at times when market prices start moving faster than perceived fundamentals. But the bottom line is, the market has to prove that it has priced in this whole China slowdown/emerging-market spillover/Federal Reserve coin toss litany of concerns.
