Tuesday, August 2, 2011 4:32 PM – Fear in Stocks, Good for Bonds

Stocks finished -2.1 (DJIA) to -3.26% (small stocks) lower. The S&P 500 is now negative on the year, excluding dividends of about 1.2%.

Bonds were higher again as was gold, up 2.4%.

The US dollar was also up
which seems odd with slowing growth and mounting debt. But, as Europe, which is short on liquidity, borrows from America they must buy dollars and sell Euros. This pushes the dollar up. Technically, the dollar is at a strong support level, too.

The S&P 500 is now 1% away from long-term support at 1240. Technicians argue that falling through that level would likely trigger more of a sell-off. The next support level is 1140, about another -9%.

Significantly, the volume is much higher on down trades than up trades.

Either we are are close to a climax of selling that will lead to a bounce or we will have a good bit more selling. Watch the 1240 level.