Breakdown

Breakdown. It's the best word to describe what happened on Thursday in the stock market. On Tuesday, I might have mentioned here that we happened to close on the Dow at precisely the previous 6-year closing low which was reached in late November of last year, and how key Wednesday's trading action was going to be in terms of whether the previous low holds, or breaks down just like the September lows did all through October, and like the October lows did in November. Wednesday ended up surprising everyone by finishing almost exactly where we started the day, the Dow gaining just 3 points and change, still sitting essentially right on top of the November 21 low of 7552.20, and basically setting up Thursday as the next real test of that level. Heading into the action on Thursday, after finishing modestly higher on Wednesday in the face of that major market retest, I hoped there might be some optimism out there for another successful retest, being that this is the same week as the Obama administration announced its revamped and expanded bank bailout program, and a nearly $800 billion economic stimulus package was signed by the president, a bill that received exactly three republican votes in the Congress. Yum.

Well so much for that theory.

Instead, on Thursday the Dow went and dropped nearly 90 points or 1.2%, making a fresh 6-year closing low, and now we're kind of in no-mans land until probably the 7250 range, which is where the Dow bottomed during the mini-recession that followed the terrorist attacks of 2001. The broader S&P 500 index has yet to confirm the breakthrough of its late November lows, but as of Friday morning's open the S&P sits just 26 points -- around 3.5% -- above its closing low level of 752 and change, which if you recall already marked a more than 51% decline from its highs in October of 2007.

The reason I bring this up today is that it's a pretty good bet what happens in the market on Friday given the recent action on Wall Street. After a breakdown like that on Thursday, from a purely technical and psychological perspective here on a Friday, with options expiring as well, there is a strong likelihood of increased selling throughout the day. The market making new lows here not even a month into the Obama administration is a literal nightmare for the new administration and for all of us who were hoping that a change in President would bring new fortunes for the American people. It is wayyyyyy too early to fairly judge any new president's term -- especially one with as little political experience as this one -- but so far the first month has not started off nearly the way mostly all of our country wanted, that is for sure. Now it is highly likely that we will have to sit and watch the market probe for new lows, a new bottom from which to hopefully find support and start the long climb back.