MARKET CONTINUES TO FALL ON BAD BREADTH -- NYSE INDEX BREAKS JUNE LOW -- DOW AND NASDAQ UNDERCUT 50-DAY AVERAGES -- RUSSELL 2000 SMALL CAP INDEX TRADES BELOW 200-DAY LINE -- WEAKEST GROUPS ARE AIRLINES BROKERS, AND HOMEBUILDERS
SUPPORT LEVELS ARE BEING BROKEN... The market continues to drop on very bad breadth. Losers on the big board are swamping gainers by a 10 to 1 ratio. The same is true of downside volume versus upside volume. [The NYSE AD line hit a three-month low on Tuesday]. The charts below show the situation around midday (1:00 NY time). The extent of the day's damage will depend on where the markets close today. Chart 1 shows the S&P 500 threatening its June low. The NYSE Composite Index (which has a heavier weighting in basic materials and energy which are very weak) is already trading below that support level (Chart 2). Chart 3 shows that the Russell 2000 Small Cap Index is already trading beneath its 200-day line. Some of the stronger stock indexes like the Dow and the Nasdaq are slipping below their 50-day lines. If the markets close at these levels or lower, a lot of short-term technical damage will have been done. All market sectors and industry groups are in the red. The biggest losers are airlines, brokers, and homebuilders. Although the dollar is down, gold is falling $10. Gold stocks are also weak. The CBOE Volatility Index is testing its high for the year which is a potential bearish sign. Many global stocks are down more than 2%. The fact that the Japanese yen is hitting a new 3-month high is causing some unwinding of the "yen carry trade". Bonds are big winners in a huge flight to safety.
Chart 1
Chart 2
Chart 3
BOND PRICES SURGE AS YIELDS FALL ... Chart 4 shows the 10-Year Treasury Note plunging to a new two-month low today. Bond prices, which rise when yields fall, are surging. Chart 5 shows the 7-10 Year Treasury Bond ETF (IEF) surging nearly 1% today. That's a sure sign that investors are selling stocks and buying bonds. We'll review all of the markets after today's close
Chart 4
Chart 5
