On Friday’s session, the market breadth was horrendous. The U/DVOL ratio was 13.6 to 1 favored the DVOL. The decliners outnumbered the advancers by more than 2200. There were more than 600 new low and no new high in the NYSE. At the close, all the major market indexes closed with new pullback low and the DJ Industrial made a confirmed low.
The SP500 closed on Friday at 1970.89, a loss of -64.82 or -3.19% for the day. It has closed below the 1972.56 support level. If it fails to reclaim this support level, then the next probable support level could be the 10/15/14 close at 1862.49 or the 4/11/14 close at 1815.69, which is near the 10/15/14 low of 1820.66. The weekly price chart shows the price is still within the 2009 rising price channel. If the price falls below the 1815.69, then the 2007 high at 1576.09 could be in play. If it reclaims the 1972.56 level, then the near term resistance could be 2040.24.
SPX
(click on the chart to enlarge)
SPX Weekly
The Nasdaq 100 was the worst performer on Friday. It closed at 4197.27, a loss of -187.86 or -4.28%. It went through the 4278.14 support level without any resistance on Friday. Currently, it is sitting between potential resistance and support level. If it bounces off at the current level, then the 4278.14 could be the potential resistance. If it continues to drop, then the 12/16/14 close at 4089.60 could be the potential support. The weekly price chart shows it is still inside the long term rising price channel and the lower trendline could be a potential support.
NDX
NDX Weekly
The Russell 2000 was the best performer on Friday. It went down the least but still ended the week with a weekly loss of -4.6%. On Friday, it closed at 1156.79 with a loss of -15.74 or -1.34% and closed above the 1154.71 support. The price gap near 1175.51 remains to be the resistance and if it fails to hold the 1154.71 support level, then the next potential support could be the 12/16/15 close at 1139.38. Similar to the other indexes, the Russell 2000 is inside its long term rising price channel.
RUT
RUT Weekly
The recent downward move by the market was swift and sharp. The quick drop to major support level by the market has surprised many traders. The market breadth has been showing heavy selling and the selling has been indiscriminate. Fears have re-entered the market and the VIX has not been this high since October 2014. The Dow Jones Industrial index dropped more than 10% from its high, and the talking heads are having a field day talking about correction and the possibility for the market to enter into a bear market. As the market breadth has reached extreme level with indiscriminating selling and the media is fueling the fear gauge, expect the unexpected.
The market indexes are all in sync with each other. Therefore, one should monitor for divergence for signs of a turning point. First sign to look for is the improvement on the market breadth. Second thing to look for is an unconfirmed low from the DJ Industrial. The market has been down for four consecutive days and a dead cat bounce could appear soon. Pay attention to any sign of a capitulation before the next rally. The recent selloff bound to have caught some funds leaning on the wrong side of the trade and caused them to liquidate at any cost. Until the market breadth has improved, cash is a position. Don’t be a hero, be patient.
