Stock Market Suffers in Six Day Correction as S&P 500 (NYSE: SPY) Declines 1.6% - Mike Swanson (11/16/10)

Today the S&P shed 1.7%, the DOW fell over 175 points, and the Nasdaq dropped over 45 points as the market continued to decline in what has now became a six day correction. The drop was led by selling in commodities and gold stocks as those stocks and sectors had been among the strongest in the stock market for the past several months and are experiencing profit taking.

Bonds ended up having a strong day as the TLT 20-year treasury ETF gained 2.4%. The dollar also managed to rally 0.90% in today’s trading action.

On a technical basis the S&P 500 has now closed below the 1200 support level and is now flirting with its 50-day moving average, which currently is around the 165 level.

Selling was broad based as today saw the largest number of declining stocks in over three months now. The only two stocks that rose in the DOW were Home Depot and Wal-Mart.

The media contributed the sell-off to worries about the debt levels of Ireland, Portugal, and Greece.

In May the stock market had a sharp correction as the Greece debt crisis blew up. There are some worrying that a similar situation is starting to occur with Ireland. The Greece crisis caused a temporary rally in the dollar and the dollar is rallying now. Both rallies were countertrend moves in a deep dollar bear market.

I personally believe that we are seeing a normal correction that comes naturally once the market reaches the type of overbought conditions that it rallied into two weeks ago. We are in fact starting to see the type of panic selling that starts to come when you get near a bottom.