Difficult Day With "Puzzling" Rally

After the close, Bank of America released its earnings early:

1) third quarter EPS was $0.15, well below the expectations of $0.62.

2) dividend was cut by 50 percent.

3) credit quality continued to deteriorate.

3) most importantly, they announced a $10 billion capital raise in the form of common stock. Down about 6 percent after the close.

Overall, it was another difficult day, made all the more puzzling by a last hour rally that more than cut the losses in half.

Throughout the majority of the day, there was a lack of bids which has become typical of the market in the last month: traders believed that most participants were forced sellers, so buyers saw little reason to participate.

Volume trended toward the heavy side only toward the close of the day.

Do technicals matter? There were traditional signs of capitulation today:

--about half the securities at the NYSE hit new lows--levels almost never seen

--VIX hits historic highs

--"defensive" stocks sold off with the rest of the market. In fact the breadth of the decline was remarkable: 9 of the 10 S&P sectors were down 3 to 5 percent.

The market did turn around as they indicators hit extremes, but few traders believed in a permanent bottom, some because the volume was not there, some because their confidence in their own metrics have been badly shaken.

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