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Technical Talk

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90% Declines Abound

By Arthur B. Hill - Tue 30-Sep-08 9:59 AM EDT

Monday's decline in the stock market was one of the broadest in recent memory. Comparable declines include September 1998, September 2001 and July 2002. Basically, selling pressure was so indiscriminate that investors threw out the baby with the bath water. Surely there are few good stocks out there. As the table below shows, over 90% of the stock in the major-index ETFs declined on Monday. All stocks in the Dow Industrials ETF (DIA) and Nasdaq 100 ETF (QQQQ) were down. The Russell 2000 ETF (IWM) and S&P 600 Smallcap ETF (SML) had the highest percentage of advancing stocks with just over 5% of the components moving higher. Only 10 of the 500 stocks in the S&P 500 ETF (SPY) advanced. This kind of selling pressure is indicative of a panic and Monday's sharp declines created oversold conditions, both of which could lead to a bounce in the coming days.

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