The latest trend in the market is sell all "stuff" stocks (commodities, agri, shipping, etc.) and buy financials, housing and consumer discretionary. Isn't this insanely counterintuitive? If the market is pricing in a downturn, there is no reason why the most toxic sectors are up. An interesting thing to note is the massive run to safe treasuries (as seen by the decrease in the 10 year bond yield).
My take on all this is that it is not news related but the news does exacerbate the action. Gustav was a dud and that put more pressure on hedgies that were tied to their commodity longs, and incidentally and also short financials, housing and consumer discretionary! So I think this is the classic unwinding of positions trade with some hedge funds blowing up, having to sell their long commodity holdings and cover their shorts, and money is being put exclusively into safe treasuries. I do think the dollar strength has something to do with this but come on..if the dollar is up, our exports are going to be crappy which means crappy economy leading to more weakness (this explains some of the tech weakness though).
Hence, to conclude, I believe if we go down now, it will not stop for a while and will include all sectors under the sun! But my money is on all boats rising (due to a falling dollar as well) and breaking through 1300 on S&P pretty soon. Let's see.
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