Selling Begets Selling, World Equity Markets Crash on Fear of Reality Setting In

Dow Jones Industrial Average, 3 month daily

Dow, August 4, 2011 - 5 minute

The selling pressure continues to heat up across the board as picks up to levels not seen since the first Greek crisis in April and May of 2010.  The Dow lost over 500 points today, this was the biggest daily drop in the Dow since December 2008.  497 S&P 500 companies were down for the day.  All this as the US hits the momentous milestone of 100% debt to GDP.

Dow -4.31%
Nasdaq -5.08%
S&P -4.78%

Across the water the FTSE, Stoxx 50 and the DAX all down around 3.40%, European stocks are making new lows for the year.

NIKKEI and TOPIX both lost over 3.00% on the day and the Hang Seng Index lost 4.50%.
  

S&P 500 Large Cap Index, 3 month daily

S&P 500, August 4, 2011 - 5 minute

3 year VIX daily

10 day VIX - 30 minute

Selling begets selling, silver and gold got caught up late in the day running into a largely deflationary psychology.  As investors rushed to raised cash to cover, what I have previously referred to as, potentially deficient margin trading accounts, long funds that were not properly hedged were massacred today.  News of Italian instability and potential default, while the MPC and the ECB made no significant changes today. 

4 Month Silver Spot daily

Silver gave over 6% today getting hammer from 11:00 to 12:15 est.  But to put things in perspective the long candle took us down to close at the 38.2 retracement level, and never had intraday selling take us below established near term support of $38.50/oz. 

To me all this bad news is rather bullish in the long term for the metals.  Governments will play their notoriously tired hand of throwing new money at old problems, in order to maintain the semblance of solvency.