Stocks sold off today with the Nasdaq Composite (QQQQ) suffering the biggest losses as the technology sector declined 1.4%. The losses were smaller on the DJIA (DIA) and S&P 500 (SPY) because the consumer staples, health care, and utilities sectors managed to finish flat or slightly up indicating money is moving out of the market or to more defensive sectors of the market. Market breadth favored the bears as well and the major indexes which have been finding support near their 21-day moving averages were unable to close above them after running into resistance at them early in today's session. As a result of today's stock market direction action we are lowering the support and resistance levels for the DJIA, S&P 500, and Nasdaq Composite (see below). It appears the major indexes will now look to test their 50-day moving averages to see if they can find support at these level. If the 50-day moving averages do not hold then the S&P 500 and Nasdaq Composite could test down to the 1,310 and 2,740 areas, respectively we have been mentioning in our recent posts. In mid-April the S&P 500 and Nasdaq Composite had a session where they gapped up at the open from these levels. The market at some point usually re-tests any gaps it has created. The action in the Semiconductor Index (SOX) was negative as well today and was bad enough to move the SOX below both its 21-day and 50-day moving averages. The SOX has an open gap that if it decides to fill it could push it down to the 425 area.
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BTDStocks.com Monday, May 16, 2011 End-of-Day Update
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