Stocks fell sharply yesterday over concerns that Thursday’s deadline for Greece’s debt swap will fail, China’s announcement of an expected slowdown, and a Q4 eurozone GDP report that was minus 0.3%.
Within minutes of the opening, the Dow was down 120 points and tumbled until about 2:30 p.m., when a tepid rally managed to halt the decline. It was the first triple-digit decline for the Dow industrials this year, closing off 204 points at 12,759. The S&P 500 fell 21 points to 1,343, and the Nasdaq lost 40 points to close at 2,910. Decliners were ahead of advancers by over 10-to-1 on the NYSE and 4.6-to-1 on the Nasdaq. The NYSE traded 877 million shares, and 515 million shares crossed on the Nasdaq.
Since the S&P 500 is the most prominent index, it is important to outline its technical points. Yesterday’s pullback followed a reversal from a new high. The intraday low yesterday penetrated the first major support line at 1,356, thus 1,356 is an inflection point and tells us that a near-term correction is finally under way. The major band of support is now 1,333 to 1,356 with a narrow support zone below it at 1,322 to 1,333 — note the blue 50-day moving average at 1,322.
The support line at Dow 12,750 is as important as the S&P 500’s line at 1,356. A penetration of these lines could lead to a more serious correction.
Currently, the market is still in an intermediate-term and long-term uptrend. But the near-term trend has changed to “down.” And the Relative Strength Index (RSI) has quickly fallen to below the mid-mark of its range indicating that the sell-off will likely continue for several more days until the RSI at least reaches the approximate lows of November for both major indices.
Wise investors and traders should prepare a list of stocks that they would like to own and the respective “buy under” prices. We are about to be rewarded with some bargain-basement deals.
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.
