MARKET INDEXES SELL OFF AS 50-DAY AVERAGES ARE BROKEN -- NEXT SUPPORT LIES AT 200-DAY LINES -- COMMODITIES SELL OFF WITH STOCKS AS CRUDE FALLS TO A THREE-MONTH LOW -- TREASURY BONDS BOUNCE AS STOCKS SELL OFF
DOW BREAKS 50-DAY AVERAGE... The Dow Industrials fell more than 200 points today to turn the market's short-term trend lower. Chart 1 shows the Dow falling well below its 50-day average. The next level of support to watch is the line drawn over its July peak and its late August low just below 13000. That also coincides with the Dow's 200-day average. A "risk-off" day is seeing money flow out of global stocks commodities and back into Treasuries and an oversold U.S. Dollar.
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Chart 1
NASDAQ TESTS 200-DAY LINE ... Chart 2 shows the Nasdaq Composite already testing its 200-day line and potential chart support along its early June peak (horizontal line). That puts the Nasdaq market at a critical chart point. This would be a logical spot for new buying to emerge. The Nasdaq would have to decisively undercut its 200-day line to signal a bigger market drop.
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Chart 2
COMMODITIES ALSO RETREAT... Commodities are retreating along with stocks. Chart 3 shows the DB Commodities ETF (DBC) fallng below its 200-day average today. The commodity rally that started during June was halted at chart resistance formed during the spring (see arrows). Crude has been one of the weakest commodities. Chart 4 shows the United States Oil Fund (USO) falling nearly 3% to the lowest level in three months. That helped make energy the day's weakest sector.
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Chart 3
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Chart 4
TREASURIES BOUNCE... When stocks sell off, Treasury bond prices usually bounce. Chart 5 shows the 20+Year Treasury Bond Fund (TLT) having just bounced off its 200-day average (red arrow). The intermediate bond trend, however, is still lower. The TLT needs to clear its late September high near 125 (green line) to turn that trend back up again. It would probably take a deeper market correction to cause that to happen.
