Yesterday the enormous rush of sellers demolished all near-term support and sent the major indices almost 5% lower. The rush to sell pummeled NYSE stocks with volume of 1.8 billion shares as 91% of all stocks on the Big Board and Nasdaq showed a loss for the day. The Nasdaq had its worst day since Nov. 12, 2008.
The S&P 500 easily broke 1,223, the number needed to confirm a breakdown from the neckline at 1,263. That break establishes a minimum target of 1,143, but it is more likely that the ultimate bottom of this global sell-off will lie somewhere within the zone of last summer’s trading range at 1,040 to 1,130.
The seven-month sideways pattern of the Dow Jones Industrial Average finally gave way. The selling, which picked up dramatically after 2 p.m. Thursday afternoon, not only crushed the March 16 low at 11,555, which many technicians highlighted as support, but the major bull market support line at 11,500.
And just to put the bear’s honey on the cake, the Dow Jones Transportation Average broke to a new low, providing Dow Theory purists with undisputed confirmation of a new bear market. Note that the new low broke from one of the most bearish of all chart patterns, the “Bearish Horn” (StreetSmart) or “Broadening Top” (Edwards & Magee). A breakdown from a horn is unusual but, according to StreetSmart, one of the most accurate of all formations.