David Chojnacki S1F Market Technician
A 'gap down' at the open sent the Market off nearly 1% in the first five minutes. The sell-off continued till 11:00am when traders finally found a level that they could buy. By the final bell, the averages were off their lows but the damage was done. At the close, the DJIA was down 0.95%, the S&P lost 1%, and the Nasdaq100 losing 1.3%. Breadth was negative, 4 to 1, on average volume. RSI's have dropped significantly, with the DJIA moving below 50, the S&P just above that level, and the Nasdaq100 dropping to 60. While ROC(10's) remained barely positive, they declined across the board. MACD's continue to turn down and below signal. A significant event in yesterday's session was the DJIA close below its 20D-SMA(13138). Aside from one day in March( March 6th), the DJIA has not closed below its 20D-SMA since
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Dec. 2011. Near term technicals were further weakened by yesterday's action. We have been trading in a narrow range since March 13, and we may be developing the fourth wave of our rally since October 2011. It is not uncommon for a fourth wave to move laterally, as opposed to a pullback or correction. I'm watching the 1385 level in the S&P as a barometer for additional pullback(perhaps at least a 5-6% correction). The DJIA finds support at 13000 and also at 12970(50D-SMA). Upside resistance is now at 13138 and 13264. The S&P closed below 1400, but held 1397 support at the close. Look for 1397 and 1388-85 to provide near term support. Near term resistance now stands at 1400 and 1412. The Nasadq100 bounced off its 20D-SMA(2730) in the session and that will remain as near term support. Upside, we see resistance at 2750 and 2775. Early Futures are lower versus fair value.