There's a joke among news folks that two points make a trend. If it does, and of course it doesn't, I heard an alarming one this morning: the Dow going down into the 9,500 zone.
It came from Ben Lichtenstein, president of TradersAudio.com, on "Squawk Box" this morning. I listen to it on my satellite radio as I drive in. He suggested if the Dow trips through 11,000 or lower, then 9,500 is a possibility too.
"The market right now is really looking at a couple of critical levels as far as I'm concerned. Looking at 11,000 in the Dow right now. It's managed to hold for the most part this week. And we're quite a bit off right now. ... It would be a ... high energy move lower if we were to test those levels today. But I think in the near future we definitely will. And how those hold up is really going to determine what we see at the lower levels, about 10,000 (or) 10,500 right now. If those give way look out, we're talking about 9,500. And I know people really kind of laugh at that number when I throw it out there, but it's realistic." (See video for full interview).
I would have been one of the laughers except that I had read much the same thing earlier in the week in a market outlook piece one of our writers, Jeff Cox, did on the Web site. It quoted Larry Edelson, financial analyst at Money and Markets online investing newsletter, saying stocks still have room to fall and that the Dow could drop to as low as 9,200.
Lots of people have been full of doom and gloom lately. It's just these two guys just threw out scary numbers.
And it is the scary numbers that get attention. And so media guys like me latch onto them. Hey, when smart people are talking about scary things, we have to report it. Some critics, however, believe that makes the media too negative.
They are right ... occasionally.
In this case the market gloom talk should be balanced with a mention of capitulation ... the magic turning point the market seems to be searching for. (Have you noticed a lot of traders describe capitulation with a vomiting metaphor? Guess it fits, if a little crude. Falling and dropping to the point where you are so dizzy that you throw up ... then feel better).
Capitulation is the good news hovering just beyond the bad news. It's a point worth keeping in mind while reading scary headlines and watching depressing interviews.
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