After a rally like we had yesterday, today’s minor sell off could be expected.  A 400 point movement by the Dow is no small figure,  it is likely that today’s drop was led by profit taking.’

Something you’ll hear a lot about is a small movement after a large day.  It is very common that after a large movement up, the market will trade near 0 for the next day.  People buy in and out of large rallies, causing a turbulent day right after.  Yesterday the Dow was up more than 400 points, today it was down 45.

This likely occurs because people place orders for the market open.  Through midday, the market was up 150 points but tapered off as profit-taking started a sell off.  The cash strapped investment banks probably led the decline by selling off large portions of their holdings to raise cash.

The problems with the mortgage industry is causing banks to sell their positions to raise cash.  Visa’s $18 Billion IPO looks more like a sellout rather than a public offering.  The banks are unloading Visa for two reasons, they’re flat broke and Visa is extremely volatile to recession.  The credit card industry is likely to be caught holding the bag on billions in bad debt.  Unsecured loans are often the first loans in default stage, and mortgages one of the last.  If there are 3 million homes in foreclosure, its probable that there are a lot more credit card accounts in the same situation.

Electronic trading should be partly to blame.  The availability of the markets to round the clock orders makes days like this that much more likely.  The quick gains of yesterday are sure to be cashed in, we won’t see a day like that in quite some time.  Some might attribute today’s sell off to worries about inflation.  The market should go up in times of inflation rather than down, so I don’t think that is the case.  The $200 Billion lending package has certainly made a mark on the financial markets however.

Commodities were up on a weakening dollar.  The dollar now trades at 1.55 to the Euro and nearly $1000 for an ounce of gold, and $110 for a barrel of oil.  The FED loan package likely cause the drop in dollar demand and boosted commodity prices.