AT&T SPARKS LATE SELLOFF -- DOW AND S&P 500 BREAK NOVEMBER LOWS -- BEAR FUND BREAKS OUT TO THE UPSIDE AS BEAR MARKET APPEARS MORE LIKELY

AT&T PLUNGE STARTS SELLOFF... It's always dangerous to attribute a market selloff to one stock, especially a market that has so much working against it. Today, however, a plunge in the stock of AT&T starting around 2:30 may have started the late selloff that took stocks sharply lower. If you compare the 5 minute bars of S&P 500 SPDRS in Chart 1 to the 5 minute chart of AT&T in Chart 2, you'll see that both started plunging together this afternoon. And both did so on expanding volume. In a falling market, stocks often look for an excuse to fall. Today, that excuse may have been the bad news coming out of AT&T. The daily bars in Chart 3 show AT&T closing more than 5% lower on heavy volume. The rest of the market suffered more chart damage as well.

Chart 1

Chart 2

Chart 3

MARKET INDEXES BREAK NOVEMBER LOWS... Charts 4 and 5 show the Dow Industrials and the S&P 500 closing below their November lows. That makes today the lowest closing price in both indexes since last spring. It also pushed the S&P 500 further below its 400-day (80-week) moving average (green line). Volume was heavy and breadth was negative. The biggest losers were the usual suspects -- consumer discretionary, financials, small caps, and transports. The only winners were gold, healthcare, and utilities. Crude oil jumped $1.40 and gold $18. The dollar fell as bond prices rose. Bear funds had another strong day. Chart 6 shows the Short S&P 500 ProShares Fund (SH) closing at a new 52-week high. Recent market action only serves to strengthen my belief that we've entered a new bear market. [Please see my earlier Market Message on defensive buying of healthcare, gold, and utilities and why that carries bearish implications for the market and the economy].

Chart 4

Chart 5

Chart 6