Who Let the Bears Out?

Continuing the trend from yesterday, the Dow closed down a whopping 416 points for the day. Apparently the slide was exacerbated by a technical glitch at the end of the day, with traders still on the floor hours after closing trying to square up positions.

Reality-Based Educator asks if we can expect this to continue or if we will get a recovery by the end of the week. Well, if I knew that, I wouldn't have to work. For now, it doesn't look like we have hit the bottom. The European markets have opened lower than expected, another 1.5 to 3.0% depending on what index you look at. So for the time being, it doesn't seem like this is over. There is very heavy volume, and you have to figure the bears who have been hibernating for the last 6 months, are up big which means they have a lot of money behind them to continue to short the market.

This will be a real test of the effects of the hedge-funds. Analysts have warned that hedge-funds are exaggerating moves both to the positive and the negative. If this is truly the case, we could see an overblown move to the downside for the rest of the week.

If I had to bet, I'd say this move is going to continue, and we won't see any significant recovery this week. There may be a good buying opportunity at the end of the week, but the smart money says we haven't seen the bottom yet.

Update: European markets have recoved from their morning lows and are now down only 1% on average. Shanghai rebounded by nearly 4% overnight as well. Dow futures are up 100 points. This all bodes pretty well for the wall street open. So in the short term way very well may get a bounce. After that, I imagine a new low will be tested late this week or early next week.