Subprime Drama Sinks Stocks

The significance of another big down day after last week's rebound effort shouldn't be underestimated.

Heading into Tuesday's session, the technicians at Lowry's Reports, the nation's oldest technical research firm, generally viewed the recent selling as a correction within an ongoing bull market, rather than the start of a new bear market.

"If we have another 90% downside day, that would change our attitude," Richard Dickson, senior market strategist at Lowry's, told me Tuesday afternoon. "If that happens, we'd have to re-evaluate that the lows were made a week ago, and we could be in for a lower low, perhaps substantially."

For the record, Lowry's defines a 90% downside day as a session in which both volume and price action are at least 90% to the downside. At press time, I am unable to confirm whether NYSE price action was also 90% to the downside; Dickson was unable to comment after the close.

And recent lows for major averages were 12,039 for the Dow, 1374 for the S&P and 2340 for the Comp.

"Everyone is going to key off the 1374 area" for the S&P, says a trader, who suggested that the upcoming expiration of stock index futures, stock index options, stock options and single stock futures probably exacerbated Tuesday's weakness. But Friday's so-called quadruple witching session "should settle out the market" in the days ahead, he adds.