Wednesday’s session started higher on news that China would increase its investments in Europe. But news from the Fed that industrial production in January failed to meet expectations drove stocks lower. And (surprise) eurozone officials may wait to pay out funds to Greece since they doubt that the promised austerity measures will be enforced.
At the close, the Dow Jones Industrial Average had fallen 97 points to 12,786, the S&P 500 lost 7 points at 1,343, and the Nasdaq was off 16 points at 2,916. The NYSE traded 806 million shares, and the Nasdaq’s volume totaled 525 million. Decliners exceeded advancers on the NYSE by 1.3-to-1 and by 1.7-to-1 on the Nasdaq.
Yesterday, the three major indices ran smack into a wall with the S&P 500 exactly hitting the resistance number of 1,356, and the Dow suffering its largest single-day decline of the year, which barely recovered from a triple-digit decline by a hair.
But it was the Nasdaq that suffered the most dramatic damage. After jumping to a high not seen since December 2000, the index reversed and triggered a Collins-Bollinger Reversal (CBR) sell signal (our proprietary indicator), and also flashed a “sell” from its MACD indicator.
Unless the Nasdaq turns quickly and exceeds yesterday’s intraday high at 2,958, the chances are strong that the major support at 2,834 to 2,886 will be tested.
In order to maintain momentum, the Nasdaq had to have two groups continue to advance — the technology and financial sector. But this week the financials, as evidenced by the Financial Select Sector SPDR (NYSE:XLF), faltered following a reversal from the high of $14.86 of last Thursday, which is slightly higher than the 61.8% ($14.61) retracement of the spring high to the October low — a Fibonacci number.
Conclusion: All major indices suffered reversals of one sort or another yesterday, but the Nasdaq’s is most pronounced. But as visual as its reversal might be, it merely suggests that a long-needed correction is probably about to start. The index has a broad band of support at 2,834 to 2,886 and that is expected to hold. A decline to the bottom of that range would amount to a correction of just over 4%.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
