Global markets plunged abroad overnight and the stock-index futures are off significantly prior to the open, indicating the DJIA could open 200-points lower.
A significant worsening at the Fukushima nuclear power plant overnight has raised the potential for the release of serious levels of radiation. With Tokyo only 150 miles south and the winds currently blowing in that direction, this is an added “unknown” in an already horrendous situation for the world’s third largest economy.
I headlined yesterday’s blog as a “Week of Opportunity – Be Ready.”
Brooksie’s Daily Stock Market blog
-an edge before the market opens
Tuesday, March 15, 2011 9:24 am EST
DJIA: 11,993.16
S&P500: 1296.39
Nasdaq Comp.: 2700.97
Russell 2000: 798.17
I based that alert on the fact this is a big week for economic indicators and warned of volatility in face of Quadruple Witching Day, Friday, when we get the simultaneous expiration of stock index options, stock index futures, stock options and single stock futures.
Obviously, I did not anticipate the new problems at its Fukushima power plant, so the question now is, do investors seize this sharp sell off as an opportunity to buy ?
If the problems at Fukushima are resolved averting a serious spread of radiation and no new problems arise, global stock markets will rebound or stop declining.
With Quadruple Witching Day approaching, I suspect some of the unwinding of contracts that normally accompany Friday’s event is already taking place adding to the volatility. Can’t be sure, just an educated guess, but worth considering.
The markets can discount bad news; they find a comfort level and stabilize. It has greater difficulty with unknowns.
Yesterday, I said the combination of economic releases and quad witching could spell opportunity, that investors should be positioned to exploit it, and that the BIG money will lead the way.
Recently, I targeted the DJIA 11,700 (S&P500:1260) as reasonable support levels for the correction that started in February. Monday, I analyzed each of the 30 DJIA stocks technically, picking two downside risk levels one moderate, the other more extreme. It’s a good exercise to counter just analyzing the DJIA itself.
I arrived at two levels. Moderate risk = 11,800. More extreme risk 11,540. The same exercise in February concluded 12,062 and 11,770 respectively.
We are dealing with a huge unknown here. Action must be determined by one’s tolerance for risk.
This situation is changing by the hour. Not yet known is how much will U.S. industry be impacted by the earthquake/tsunami ? Japan is a major source and consumer of products.
The markets will find a comfort level where it discounts known and anticipated adversities, ergo a buying opportunity.
George Brooks
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