TGIF!

Today was one of the most interesting days I have ever witnessed in the markets. I am not a market expert so take all of this with a grain of salt, but it was watching history in the making.

I would say it was a really bad day like last Friday. Last Friday I wrote that it was a really bad day that did not bode well for the markets. This week certainly seemed to support that logic with the DOW having its worst week ever in its 112-year history. It was a really bad day last Friday because the credit markets were screaming with the TED Spread at historic highs and prices of everything down on the day (everything except Treasuries). Stocks, oil, and even gold fell last Friday. By that logic today was even worse.

Today the TED spread was even higher than last Friday, stocks, oil, and gold all fell again, and unlike last Friday even Treasury securities fell in price. It feels as though there is a mass liquidation going on as investors scurry to meet margin calls. Sell anything and everything – we need cash! De-leveraging is in high gear this week.

There were, however, some encouraging signs in the stock market today. After falling precipitously at the open, over 690 points down, the DOW recovered and went positive for a while in what was a stunning reversal. It then lost steam and spent the better part of the day down between approximately 250 – 500 points. At the end of the day the index made another comeback, again turning positive by over 300 points before ending down a “mere” 128 points (seems like small potatoes now). The spread between the high and low of the day, 1,018.77 points, was the largest ever in the history of the DOW. The Nasdaq ended up just ever so slightly.

Summing it up, virtually all asset classes were down today including stocks (on NYSE record volume), bonds (including Treasuries), and commodities (including gold), while the credit markets remained in shambles. This suggests the markets are in full de-leveraging mode and its sell first, ask questions later. There were, however, two remarkable intra-day rallies in the DOW and the Nasdaq ended up for the first time all week, providing a glimmer of hope. It really did seem as though bargain hunters came out in force today and scooped up stocks on the cheap when the market was under extreme pressure. Whether this is a sign that things will moderate is impossible to tell and in the end all asset classes ended down in price. It was comforting, however, to see the cash coming to the table. Even I dipped my toe in the water and I am extremely bearish. Greed got the better of me but I kept it in check by making only small purchases and putting on a hedge. Unfortunately, if nothing changes for the better over the weekend and the de-leveraging continues, next week could be another painful one. There were hopes that the G-7 Finance Ministers and Central Bank Governors would come out with a coordinated plan of action to battle the credit crisis and that may have been fueling some optimism. Unfortunately there was no plan, only a "commitment" to continue working together to stabilize the credit markets – something that has not happened yet. One thing that has happened – I have a splitting headache from following this week's gyrations. TGIF!

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