Technical Non-Event

This is a clip from yesterday’s Globe Report on Business, “North American stocks suffered their deepest losses in more than a month Monday, as investors fled from risk amid deepening worries about the spread of European debt contagion, the U.S.'s own debt problems and the looming corporate earnings season.”

The S&P/TSX composite index closed down 191.95 points, or 1.4 per cent, the Dow Jones industrial average lost 151.44 points or 1.2 per cent and the Nasdaq composite index slumped 57.19 points or 2 per cent. It was a gloomy day.

The markets were been hoping the Greek crisis could be limited to Greece and a few other smaller Euro area nations such as Ireland and Portugal. But the sudden rise in concern about Italy raises the spectre of a much broader and harder-hitting debt crisis.

Pile on the uncertainty is the continuing impasses in Washington over the U.S. debt ceiling and the result is the fear of risky assets.

Now the problem technically is there is no problem. Our chart today is the Dow Industrials (daily) plotted above the Dow Transports (daily) along with the industry standard 50 and 200 day simple moving averages. Note in each plot the shorter 50 DMA is above the longer 200 DMA. Note also the price of the industrials and the transports is still above the 50 DMA. The nasty two day sell-off is a technical non-event so ignore those perma-bears who wish to scare you out of equities