Stocks fell victim to lower crude prices and economic weakness in Europe and Japan on Monday. The S&P 500 fell 0.7% with seven of ten sectors lower, and the Nasdaq declined 0.8%. The Russell 2000 lost 1.3%, and the Dow had its biggest one-day loss in six weeks, off 0.7%.
Crude plunged 5.5% to a new five-year low at $63.10 a barrel and took most energy stocks down with it. This was blamed on OPEC’s decision to continue pumping at relatively high levels. The PowerShares S&P SmallCap Energy ETF (PSCE) fell 7.6%. Chevron Corporation (CVX) lost 3.7%, and Exxon Mobil Corporation (XOM) dropped 2.3%.
Financials and health care were the only sectors to show gains Monday. The Select Sector Financial Slct Str SPDR Fd (XLF) was up 0.4%, and the iShares NASDAQ Biotechnology Index ETF (IBB) rose 1.6%.
Gold futures gained 0.4% to $1,194.70 an ounce. The yield on 10-year Treasury note fell to 2.2% as investors scrambled to get into less aggressive investments.
At Monday’s close, the Dow Jones Industrial Average was down 106 points to 17,852, the S&P 500 fell 15 points at 2,060, the Nasdaq dropped 40 points to 4,741, and the Russell 2000 was hit for 15 points at 1,167.
The NYSE’s primary market traded 794 million shares with total volume of 3.7 billion. The Nasdaq crossed 2 billion shares. Decliners outpaced advancers on both exchanges by 2.3-to-1 on the Big Board and by 2.9-to-1 on the Nasdaq.
The NYSE Composite, which contains all stocks traded on the New York Stock Exchange, failed to hold at the support line at 10,864, closing lower by 107 points. The chart also shows a recent death cross — 50-day moving average crossing through 200-day moving average — a bearish signal. But the most disappointing chart characteristic is the turn down from a triple-top. And with that momentum moved into the negative zone. MACD is also negative.
Conclusion
During the past week, I’ve reviewed the charts of small-cap, mid-cap and big-cap indices, and now, the index that covers a broad base of stocks, the NYSE Composite. All are showing near-term weakness.
The NYSE Composite chart has support at around 10,700. However, with all charts flashing bearish signals, the decline could end up being a full 50% retracement of the October lows to November highs. That means 10,400 on the NYSE, Dow 16,700, S&P 500 1,960, Nasdaq 4,475, and 1,120 on the Russell 2000.
Since we are still in a powerful bull market, a correction should be viewed as a buying opportunity. Genuine buying opportunities occurred only three times this year — in early February, early August and mid-October.
It would be unusual for a correction to occur in December; however, if it occurs, buy quality stocks at predetermined prices. Now is the time to make a list of stocks you would like to own and prices that you are willing to pay and enter good ’til cancelled (GTC) orders to buy at those bargain basement prices.
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.
