Stocks were hard hit by a broad-based sell-off Thursday that resulted in a 1.5% decline for the Dow industrials, a 1.6% drop in the S&P 500, and a 1.9% loss for the Nasdaq.
The selling was attributed to geopolitical concerns and worries over global growth. In prior pullbacks willing buyers quickly appeared, but on Thursday, stocks slid lower with little in the way of such buyers. Low volume exacerbated the impact of the selling.
Technology stocks, led by Apple (AAPL), which was down 3.8%, headed the list of decliners. Biotech stocks were also hit hard with the iShares Nasdaq Biotechnology (IBB) off 1.9%. All 30 Dow stocks ended in the red and even utilities lost 0.6%.
At Thursday’s close, the Dow Jones Industrial Average was off 264 points at 16,946, the S&P 500 fell 32 points to 1,966, the Nasdaq declined 88 points at 4,467, and the Russell 2000 fell 18 points at 1,110.
The NYSE’s primary market traded 720 million shares with total volume of 3.3 billion shares. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by 4.8-to-1, and on the Nasdaq decliners led by 4-to-1. However, of significance to technicians, declining volume on the NYSE outpaced advancing volume by over 10.6-to-1.
The Nasdaq penetrated several significant support points, including the line at 4,485 and the 50-day moving average at 4,493, and closed barely under the lower Bollinger Band at 4,466.77. These violations should not have an impact on the major trend but could draw sellers in the near term.
Like the Nasdaq, the S&P 500 broke its 50-day moving average at 1,976 and closed below its lower Bollinger Band at 1,966.88. Unlike the Nasdaq, its MACD is not oversold — a negative.
Conclusion
As readers already know, I warned of a nasty week following the third-quarter triple witching based on historical data, and it looks like this year will add validity to the list of negative quarters.
However, with the Nasdaq and Russell 2000 now oversold, the charts support a shallow pullback and not a deep dive to the 200-day moving averages. There are two reasons for this: First, the Nasdaq’s MACD is already oversold, as is the Russell 2000. The other reason is that lower Bollinger Brands are usually penetrated at a point close to the bottom of a near-term pullback.
My estimate of the depth of this correction will be no further than the Nasdaq’s support band at 4,370 and the S&P 500’s support cluster at around 1,920.
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.
