8:55am (EST)
The bears took another step towards cracking major support levels as they spent all of Tuesday pounding the bulls into a corner. In round 2-out-of-5 this week, the bears scored their second consecutive win, but more important, they did some serious technical damage as both the Nasdaq and S&P 500 dipped below their 50-day moving averages.
The Dow dropped triple-digits, or 117 points, to settle at 12,263 but traded to a low of 12,233. This was slightly above our 12,200 downside target and another breakdown could lead to 12,000.
The S&P 500 fell 10 points, or 0.8%, to close at 1,314. The index never had a shot of retaking the 1,325 level yesterday and we said to watch for a test down to 1,300. The index dipped to an intraday low of 1,309 but we didn’t see any “panic selling” and we were looking for 1,310 to hold.
The Nasdaq tanked 27 points, or 1%, and is folding like a cheap lawn chair. We mentioned yesterday that the “high beta” stocks are taking a lashing and yesterday’s 1% drop put the Nasdaq at 2,744. We were looking for the 2,750 level to hold but the index tumbled to a low of 2,737.
We have talked about the possibility of the market testing its February highs as it was waiting for earnings season to begin but we now know some companies are going to have an uphill battle. We have spent a lot of time trying to explain the current market conditions because the charts are giving us mixed signals.
We said yesterday things feel bearish but our hope was to have one more test to the top and some fluff that could take out February’s highs. Either way, this market is still gyrating and we expect wilder price swings until another clear trend is established.
In earnings news, JPMorgan (JPM, $46.64, down $0.22) came in with good numbers which we will cover in our afternoon update. Futures are up strong – Dow (+89), S&P 500 (+10), Nasdaq 100 (+19) – as we head to press.
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