STOCKS SUFFER WORST INAUGURATION DAY DROP IN HISTORY -- A RETEST OF NOVEMBER LOWS APPEARS LIKELY

NYSE INDEX LOSES 6% ON RISING VOLUME... According to Bloomberg, today's stock drop was the biggest loss in inauguration day history. Chart 1 shows the NYSE Composite Index losing 6% and ending at the lowest close since early December (as did all of the other major stock indexes). To make matters worse, big board volume rose as price fell. Big board breadth was overwhelmingly negative with 2703 stocks declining versus only 220 winners. The Dow Industrials fell 332 points (-4%) while the S&P 500 lost 5.2%. Financials lost -16% with banks losing 19%. Consumer discretionary stocks also fell hard, as did small caps (-7%) and transports (-6%). Global stocks fell as well. As I suggested earlier today, it now appears that the November lows will be retested. Treasuries lost ground today. The US Dollar rose along with the yen as stocks and most commodities fell. Gold bucked the commodity trend to close higher (Chart 2). Chart 3 shows the VIX Index jumping 22% to close back over its 50-day average for the first time in a month. A rising VIX is usually bad for stocks. All in all, it was a very bad day for stocks.

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