After months of plodding ahead, making an average gain of just 2.5 points per day, the market topped on each of the major indices in late April, traded briefly in small reversal formations, and on May 4, broke lower. But the break temporarily held on each index’s 50-day moving average.
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Then, on Thursday May 6, all three major indices sliced through the 50-day moving average like a knife through butter. The attack lower didn’t stop until it had slightly overshot the 200-day moving averages on each index. It was the biggest one-day loss in history, with the Dow falling 779 points from intraday high to low. But by late in the afternoon, much of the loss had been regained and the integrity of the 200-day moving averages was preserved.
Volatility has fallen from the heights of last week, but on Friday it jumped to 31.24, which places it in the highest range in a year. This indicates that there will most likely continue to be wide swings in both directions for at least the next several weeks.
The major support at the February lows of the indices held with reversals from just under their respective 200-day moving averages. Then, on Monday, May 10, each index ran smack into primary resistance at its 50-day moving average. From Monday until Thursday, May 13, buyers unsuccessfully pounded the 50-day moving average. But on Thursday, the Dow reversed with a triple-digit decline followed by a huge sell-off on Friday of 163 points, confirming a failure to penetrate that important resistance at the 50-day moving average. Now the bears are now clearly on the defensive trading at the midpoint of the current support zone.
Here are the immediate support zones for each average:
- Dow: 10,550 to 10,730
- S&P 500: 1,115 to 1,150
- Nasdaq: 2,270 to 2,320.
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