The Dow Jones Industrials Average (DJIA) has returned to within a few points of the lowest levels registered during November. The actual close of 7552 was within a fraction of the November 20 close but the intraday low yesterday failed to pierce below 7400 as it did on November 21.

One other interesting statistic is that the DJIA has fallen almost 10% since the day before President Obama's inauguration.

The selling yesterday was propelled to a considerable extent by fears in the global markets about the fallout of the possible defaults within Eastern Europe as mentioned here yesterday. The Austrian stock index, which is most exposed to failing credits for former Soviet bloc states, dropped by almost nine percent.

One alarming scenario which should be monitored carefully this week is for evidence that major global holders of the Euro currency - especially Asian and Middle Eastern governments and sovereign wealth funds - may begin to dump euros for dollars in a very large, systemically threatening manner.

Just another thing to add to all of those other causes for concern.



The SPY proxy shows a rather interesting candlestick formation - an inverted hammer - which, contrary to a true hammer, would suggest that buying support was found near the lows of the session. In fact the attempts to mount intraday rallies ran out of steam and the S&P 500 closed more or less at its lows for the session and below the pivotal 800 level on the cash index.

We may see a bounce effort and even some celebrations that the late 2008 levels have held but I would be very surprised to see us move on without a further aggressive attack on the 750 level on the cash index.



The Japanese yen continued its decline yesterday and the 104 level seems to be a feasible target. One of the more interesting things about yesterday's session was that the yen is losing its bid despite the rather unusual circumstance where the dollar, long-term Treasuries and gold all rallied as fear returned to global capital markets.



As I suggested here last week, the utilities sector fund XLU seemed vulnerable after breaking below a key moving average level and a key trendline. The Dow Jones Utilities was one of the worst performing indices yesterday with a 4.8% drop and underlines the fact that even traditional defensive plays are not working in a market which is lacking normal liqudity and the usual participation of institutional fund managers.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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