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This has become a scaredy cat stock market

By Patti Domm

Along with the VIX, the fear factor is rising on Wall Street and that could play a role in Tuesday’s trading.  Stocks were spooked Monday, and the Dow fell as much as 400 points as traders pointed to a multitude of woes weighing on the market psyche. Gold and Treasurys became islands of safety.

(Asbury Research Subscribers: See our December 22nd report, Emerging Opportunity In Gold?, for charts and detail on our recent positive bias on gold prices.)

The Dow closed off its lows after a turnaround in oil sent energy stocks higher in afternoon trading. The blue chip index lost 177 points to 16,027, and the S&P 500 slumped 1.4 percent to 1,853. The CBOE’s Volatility Index, which measures activity in puts and calls on the S&P 500, rose 11 percent to 26.

“It’s fear. I think one of the overriding factors right now is this fear. You see it in the VIX. You see it in the corporate bond spreads. You see it in asset flows. You see it in money coming out of equities, and in all of the usual spots where you would see fear,” said John Kosar, chief market strategist at Asbury Research. “What I say is basically driving the bus right now — is fear.”

Slowing global growth has been nagging at markets, but then so has the idea that the energy industry’s slump will create casualties among energy companies and the banks that lent to them.

Kosar said so far the S&P has stayed in a range between the low from January and the Feb. 1 high of 1,947. But analysts are waiting to see if the S&P can hold 1,820, and many expect to see a retest of the 1,812 intraday low of January.  “Until the market becomes less fearful, rallies are going to be short-lived,” he said.

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