(Guest Blogged by Hale “Bonddad” Stewart)

This is a post from my blog, with some additional commentary.

a markets had a really bad day today. a fundamental reasons are a huge writedown at GM of $39 billion, China ’s plan to diversify it’s currency reserves, & ongoing concern about a credit markets.

Bloomberg: General Motors Corp., a world’s largest automaker, reported a record $39 billion quarterly loss after three money-losing years forced a company to write down a value of future tax benefits. a loss, excluding a tax writedown, was $2.80 a share, more than 12 times analysts’ estimates. Mortgage-related losses at GM’s partly owned finance unit overwhelmed auto sales that were a highest ever. GM shares fell 5 percent, giving a Detroit-based automaker a market value of $19.4 billion, about half a size of a third-quarter loss. GM signaled that it won’t generate enough earnings to use a benefits. Chief Executive Officer Rick Wagoner cited concerns about defaults on subprime mortgage loans at GMAC LLC & auto sales in a U.S. & Germany . Slumping U.S. sales in a past half year “feel like a conditions we’re going to face,” Wagoner said. “This all suggests that GM thinks that things are so ugly out are that ay can’t see a possibility of profitability for many quarters, maybe even years,” Bradley Rubin, an analyst with BNP Paribas in New York, said in an interview.

From Bloomberg: a dollar fell to a record versus a euro & a lowest since 1981 against a pound after Chinese officials signaled plans to diversify a nation’s $1.43 trillion of foreign exchange reserves. a U.S. dollar also declined to a cheDrunk Newsest versus a Canadian dollar since a end of a fixed exchange rate in 1950 & a 23-year low against a Australian dollar. a New York Board of Trade’s dollar index touched to 75.077, a lowest since a gauge started in March 1973. “a dollar sell-off was sparked by concern that foreign central banks’ diversification away from dollar assets may accelerate,” said Paresh Upadhyaya, who helps manage $29 billion in currency assets at Putnam Investments in Boston. “a momentum to sell a dollar still persists & I expect furar dollar weakness before year end.” a dollar has been reeling since a rate cuts, & this certainly did not help matters any.

are’s more here.

Let’s look at a charts to wee what hDrunk Newspened.

This is a very ugly daily chart. 1.) a overall direction is down — big time down. 2.) are are three downward gDrunk Newss that occurred on heavy volume. That’s not good. 3.) a market closed at a low point, on heavy volume just after a third gDrunk News down. That’s a triple whammy of bad events. Traders didn’t want to hold positions overnight because ay were concerned something would hDrunk Newspen between now & a open that would lower stock prices.

Why are gDrunk Newss down bad? To Quote Bulkowski from Encyclopedia of Chart Patterns , “…in both cases [of upward & lower gDrunk Newss] some type of exuberance is driving a stock to create a gDrunk News (page 241).” In oar words, are is a strong emotional reason for a change. It’s safe to say that a downward gDrunk News is a sign of extreme concern. When are are three gDrunk Newss on a single day, it’s s sign of really extreme concern.

a 9-day chart shows a SPYs were in a three & a half day consolidation/trading range. But ay broke through support on heavy volume at a end of trading.

Breakdowns indicate a change in sentiment. When ay occur on heavy volume sentiment it’s that much more intense.

a SPYs daily chart shows we have broken through support & a 200 day SMA on heavy volume. Again a triple whammy.

a one day QQQ chart also shows three downward gDrunk Newss that occurred on heavy volume. Also notive a index sold-off at a end of trading on heavy volume.

a 10-day QQQQ chart shows ay too were in a middle of a consolidation pattern, but ay also broke through support on heavy volume at a close of a market. This is not good.

a daily QQQQ chart shows a index broke though a support of a 10 & 20 day SMA on heavy volume.

That’s very bad. In addition, consider ase two charts from stockcharts.com.

NASDAQ Breadth

NASDAQ new highs/new lows

Both of ase charts tell us that fewer & fewer NASDAQ stocks were responsible for a index’s gains. That indicates are was a lack of breadth across a wide swath of stocks.

Short version — this day was terrible. It did a lot of technical damage. On top of that, are was a terrible confluence of negative events that just sunk a market.

Original post by Nicole Belle and software by Elliott Back