Stocks Fall Sharply at Key Resistance Levels: Year End Rally May Have Run Its Course
STOCK INDEXES ARE FAILING AT OVERHEAD RESISTANCE LEVELS...
The year-end stock market rally appears to have run its course. A more hawkish Fed on Wednesday suggesting that rates will be higher for longer started the stock selling. This mornings's economic reports for November showed a drop in retail sales and manufacturing which raised fears of a weakening economy. Falling bond yields are also hinting at a recession in the coming year as are falling commodity prices. Stock indexes are falling sharply today and appear to be failing a test of key overhead resistance levels.
Chart 1 shows the Dow Jones Industrial Average ($INDU) falling sharply to the lowest level in a month after two failed attempts to clear their August peak. Chart 2 shows the S&P 500 Index ($SPX) falling to a monthly low after failing a couple of tests of its 200-day moving average (MA). The $SPX is heading toward a test of its 50-day MA. A close below that support line would be further confirmation of a rally failure. Chart 3 shows Invesco QQQ Trust ETF (QQQ) trading beneath its 50-day MA. The Nasdaq remains the weakest of the three major indexes owing to the relative weakness in technology stocks.
SECTOR RANKINGS SHOW LACK OF CONFIDENCE...
All 11 stock sectors are in the red today with the biggest losers in Communication Services and Technology. The more defensive sectors like Utilities and Healthcare are holding up a little better along with Energy. For the month, sector leadership by Utilities, Healthcare, and Consumer Staples show that the year-end rally has been on a weak technical footing. So has relative weakness in Energy (due to falling energy prices) and economically-sensitive Consumer Discretionary stocks which were the month's two weakest sectors.
