David Chojnacki, Market Technician
ECB comments from the previous day and more FED speak on Friday morning, set the stage for a poor open for equities. The market gapped down at the open and continued a steady sell-off for the entire session. The summer dull trading finally came to an end. It was the biggest move to the downside since the Brexit sell-off. Volume picked-up and selling was across the board. The indices ended with significant losses in the session. At the close on Friday, the DJIA was down 2.1%, and the SPX and NDX fell 2.4 and 2.5%, respectively. Breadth was overwhelmingly negative, 15.7 to 1, on heavy volume. RSI's moved into the lower 30's, almost in over-sold territory. The ARMS index ended extremely bearish at 1.70. For the week, the DJIA lost 2.1%, and the SPX and NDX fell 2.4%. Most of the loss coming on Friday. The near term sideways and narrow trade had volatility at lows. On Friday, the VIX spiked 40% to end the day at 17.50. The VIX moved above its 20, 50 and 200 moving averages.
Longer term, the upside bias continues, as the NDX made new highs during the week. The other averages did not follow through, and Friday's sell-off left them now further away. The major indices remain comfortably above their 50wk. moving averages. Short term, the bias remains positive, but Friday's pullback will begin to put pressure on technicals. We will watch the Fibonacci 50% retracement levels of 4516 for the NDX and 2095 for the SPX as important short term support. Near term the bias is to the downside. The major averages are below their near term moving averages and continue below MACD's. We would expect the near term weakness to continue at the beginning of this week. We get a slew of economic reports this week. Europe is down significantly in early trade. US Futures are much lower pre-market.
Major Economic Reports Today
No reports scheduled
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