STOCKS HAVE WORST DAY IN YEARS -- 50-DAY AVERAGES HAVE BEEN BROKEN -- S&P 500 APPEARS HEADED FOR RETEST OF RISING TRENDLINE EXTENDING BACK TO 2016 -- VIX DOUBLES TO HIGHEST LEVEL IN MORE THAN TWO YEARS -- LATE RALLY IN MAJOR STOCK INDEXES FADES
S&P 500 FALLS BELOW 50-DAY AVERAGE... Stocks had a terrible day today. Major stock indexes in the U.S. lost about 4% in one day. And some chart damage was done. The daily bars in Chart 1 show the S&P 500 falling well below its 50-day average. Its next potential support is the rising trendline drawn under its November 2016 and August 2017 lows near 2600. That would bring the S&P 500 down close to 10% which hasn't been seen in two years. If that doesn't hold, the 200-day moving average could be next. Some good news may be that the 14-day RSI line (top of chart) slipped below 30 today which puts it in oversold territory for the first time since late 2016. Market breadth was weak and volume was heavy. All market sectors suffered big losses as did stocks all over the world. Volatility soared. Chart 2 shows the CBOE Volatility (VIX) Index more than doubling in value to the highest level since 2015. The only good there is that the three previous moves above 40 coincided with market bottoms. Safe havens gained some ground, but not much. Treasury bonds rebounded along with gold and the Japanese yen.
(click to view a live version of this chart)
Chart 1
(click to view a live version of this chart)
Chart 2
LATE RALLY FADES INTO THE CLOSE ... The last three charts use 5-minute bars to show the dramatic downturn in the three major U.S. stock indexes today. Chart 3 shows a turnaround attempt for the Dow Industrials just after 3:00. The last three red bars, however, show the Dow ending the day on the downside. Downside volume was much heavier than upside volume, especially near the day's close. Today's weak close suggests that another retest of today's lows may lie ahead. The Dow would have to climb above the afternoon high at 24,800 to signal a rebound attempt. The five-minute bars in Chart 4 show a similar situation for the S&P 500 which ended closer to its low for the day. Initial resistance there is at 2698. Chart 5 shows the Nasdaq Composite ending the day in new low ground. Nasdaq resistance is at 7106. It looks like there may be more selling to come tomorrow. That, however, may set the stage for another rebound attempt before the week is out. That may depend on whether or not the rising trendline in Chart 1 holds.
(click to view a live version of this chart)
Chart 3
(click to view a live version of this chart)
Chart 4
