MARKET ATTEMPTS TO STABILIZE AFTER AFTERNOON PLUNGE -- TREASURIES SURGE AS CORPORATE BONDS TUMBLE

DOW RECOVERS SOME GROUND... A selling panic hit stocks earlier this afternoon which pushed the Dow Industrials down 1000 points and put it close to its February low where some chart support is likely (see Chart 1). The Dow has since regained about half of its earlier losses. I'm not sure exactly what caused the panic, but it coincided with big gains in Treasuries. Another sign of weakness is evident in sharp drops in high yield and investment grade corporate bonds (Charts 2 and 3). It looks like Europe's problems have finally reached our shores. The recent downturn confirms that global stocks are in a serious correction. From a charting standpoint, the ability (or inability) of the February lows to hold will help determine whether this is just a correction or something more serious.

Chart 1

Chart 2

Chart 3