Three-year lows amid breathtaking volatility; 650 now upside key

    Remember when you were a youngster and you’d grab the newspaper, scroll through the stock quotes and get all giddy if the stock you owned moved more than 1/4 the previous day? (Yeah, that’s $0.25 a share to all of you who weren’t trading stocks before 1985.) Well, recent action in small-cap stocks truly makes those days seem like a very long time ago. In just two weeks, the Russell 2000 (NYSE:IWM) has gone from the highest weekly close of 2008 to the lowest weekly close since May 2005. That’s a stunning 18% move from high to low and this week alone saw small caps collapse 12%. A dramatic surge in volatility often accompanies a major market bottom, but standing in the way of this bearish freight train is hazardous to your wealth.

    The Russell tumbled back into official bear market territory this week and barely waved goodbye on the way down. If you’re keeping track, 685 marks the “official” technical designation of a 20% decline off record highs. Right now, the market is actually sitting near 620, only a few handles above the major lows from October 2005. At that point in time, small-caps were simply correcting lower in the midst of an amazing 5-year-plus bull market stampede. Right now, small-caps are careening lower as America bails out of equities while bracing for a recession. Heck, who are we fooling anyhow waiting for some government number-crunchers to declare that an “official” recession has taken place? Manufacturing numbers are already consistent with a recession. Weekly unemployment claims jumped to the highest point this week since the 9/11 attacks seven years ago. Non-farm payrolls on Friday lost more jobs in one month than we’ve seen in some five years – and economists predict the next two months will be worse. The recession is already here for the common man. Back . . .

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