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Minyanville's T3 Daily Recap: S&P Plunges 3.7% as Italian Bonds Reach 'Point of No Return'


Today was definitely a "day to take notice of" in the market.

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The market was hammered Wednesday, with all major indices selling off more than 3% amid fears regarding Italian debt. The Nasdaq was hit hardest, selling off 3.88%. The Italian 10-year bond yield spiked after margins were raised, surging past the 7% threshold that is considered the point of no return. Measures need to be taken quickly to lower borrowing costs in Italy, Europe's third largest economy.

Today was definitely a "day to take notice of" in the market. The last one of these highly significant days was back on October 4th when the market put in an outside bullish reversal. Short interest and pessimism had reached climactic levels, setting the stage for a powerful bounce after the reversal. The bounce over the last two days occurred on paltry volume, which made today's harsh sell-off possible.

The October 4th reversal produced a 17% rally, and I am by no means opining that today's reversal will take us all the way back down. My point is that you have to respect today's significance. I would not hold trading longs at this level, even though it would be painful to sell into such weakness. I came into the day with several longs, but today's action got me flat before noon.

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