Bungie Monday

US stocked dropped 5.3% on the open with the Dow Industrials shedding 1089 points in 5 minutes.  By mid day, the decline was a mere 0.9%.  Many investors took that rally as the last opportunity to get out of stocks, so selling pressure returned in the after noon, leaving the major averages down 3.9% on the day, 9% over the last three sessions, down 6.8% on the year and down 11.3% from the record high set May 12th.

Officially a correction, but could this selloff become a bear market?

A correction is defined as a decline of 10% from a previous high; a bear market is a decline of 20% or more. We say, "no bear market."  Bear markets result from:

  1. Highly over valued stocks, as we saw in 2000
  2. Severe bank stress caused by over leverage, as we saw in 2008-9.

Neither of these factors is significant right now.

Read the entire commentary here.