Although the market did close above its low of the day, but the breadth indicators have reached extreme level that haven’t been seen for a long time. Today in the NYSE, there is 1335 new low and only 7 new high, while in the Nasdaq, there is 772 new low and 12 new high. This represents more than 40% of the traded stocks in the NYSE and 25% of the traded stocks in the Nasdaq have made new 52 week low. The down volume dominated today’s trading with the U/DVOL ratio of 32.9 for the NYSE and 15.3 for the Nasdaq. These extreme U/DVOL ratios are very bearish and could be a sign of capitulation.
The SP500, SPX came within 5 point to the support level of 1862.49 before it rallied back and closed at 1893.21, a loss of -77.68 or 3.94%. The 12/16/14 close at 1972.56 remains to be the resistance level and the 10/15/14 close at 1862.49 continues to be the potential support level. If it can’t hold above the 1862.49 level, then the 10/15/14 close at 1820.66 or the 4/11/14 close at 1815.69 could come into play.
SPX
(click on the chart to enlarge)
The SPY finished the day with a loss of -8.08 or -4.09% at 189.55. It came within 5 points to the support level of 181.92. The resistance remains to be the 12/16/14 close at 197.91, and the support is the 10/15/14 low at 181.92 or the 4/11/14 close at 181.51. If it breaks these support levels, then the 2/5/14 low at 173.71 could be in play.
SPY
The Nasdaq 100, NDX closed at 4038.60 with a loss of -158.67 or -3.78%. At the low of the day, it was down 410 points or 9.7%. The 4278.14 remains to be the resistance, and the 10/16/14 close at 3765.28 or the 10/15/14 low at 3700.22 could be the potential support level.
NDX
The Russell 2000, RUT broke through all the near term resistance levels and closed at 1111.69 with a loss of -45.10 or -3.90%. If it can’t get back above the 1154.71 level, then the 10/13/14 close at 1049.30 could be the next potential support level.
RUT
The market breadth is extremely bearish and it could be at the capitulation phase. In the coming days, if the market breaks below major support level with less than extreme bearish breadth, then this will be a sign that the end of this downward move is near. If the market fails to capitulate in the coming days, then look for a dead cat bounce from the market since it has been down for five consecutive days. Any rally prior to capitulation could be short lived, as it will likely be met by trapped longs waiting for the opportunity to cut their losses. Until the market has shown signs that the current downtrend has ended, continue to be cautious and remain defensive. Remember, cash is a position!
