Technical analyst Dave Chojnacki of Street One Financial breaks down Thursday’s massive market meltdown and updates the key technical indicators to watch for hints of whether the selling will end soon, or if the first bear market in nearly a decade is forming.
The market opened lower again on Thursday, as investors continued to worry about interest rates and the proposed spending bill. The Fed is hinting at a couple rate hikes this year and the 10-Year Treasury note is at 2.85%.
Investors shed shares, and the selling prompted more selling. At some point, prices seemed to consolidate, but the last hour brought another wave of heavy selling. By the final bell, equities were down significantly.
At the close, the Dow Jones Industrial Average and the NASDAQ 100 fell 4.1%, while the S&P 500 gave up 3.7%. Breadth was decidedly negative, 8 to 1, on heavy volumes. ROC(10)s declined across the board and remained in negative territory. Momentum to the downside increased.
RSIs moved lower, with the Dow 30 and the SPX nearing oversold levels of 30.3 and 28.1, respectively.
The NDX ended at 32.4. All three major averages continue with their MACD below signal. The ARMS index ended the day at 1.21, a slightly bearish reading.
After the prior sessions’ moderate losses, equities took another big swing to the downside on Thursday. All three major indices are now more than 10% from their recent highs, putting the averages in correction territory. 10% pullback levels are as follows: Dow30-23955, NDX-6320, SPX-2585.
The Dow 30 closed at 23860, just off its lows. It is now just a few hundred points from its 150D-SMA of 23243. It has support at a congestion area from November, which has a low of 23242.
The NDX closed at 6306, and broke below its 61% Fibonacci retracement level of 6348. It has support below at 6235 and at its 150D-SMA of 6181.
The SPX closed at 2581, just above its 150D-SMA of 2573. It also has support within the November congestion area of 2557.
After two days of pulling back, the VIX spiked 20% to finish at 33.4.
Near term support for the NDX is at 6300 and 6235. Near term resistance is at 6350 and 6400. Near term support for the SPX is at 2573 and 2557. Near term resistance is at 2600 and 2618.
Europe is significantly lower in early trade on Friday, while U.S. futures are pointing higher in the premarket. The only major economic report on tap today is wholesale trade at 10:00am EST.
The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.33 (+0.14%) in premarket trading Friday. Year-to-date, DIA has declined -3.52%, versus a -3.46% rise in the benchmark S&P 500 index during the same period.
DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 79 ETFs in the Large Cap Value ETFs category.