9:00am (EST)
I been to the edge
And there I stood and looked down
You know I lost a lot of friends there baby
I got no time to mess around…
Van Halen couldn’t even rally the bulls yesterday but this was their theme song…
It was another brutal day as the market fell for the 7th straight session and below key technical support levels. Tuesday’s losses have pushed the major indexes to the June lows – with the March lows just a snack away for the bears.
It was a steady decline all day with the selling pressure picking up in the last hour. The bulls could do nothing as the prospect of a U.S. debt rating downgrade now takes center stage while ongoing concerns about the fragile economy continue to make headlines.
The onslaught had a profound effect on the averages as the Dow fell for the 8th day in a row, the S&P 500 suffered its worst one-day drop in nearly a year, and the Nasdaq fell below its 200-day moving average. We did a lot of chart work over the weekend and what we figured could happen and has happened.
The Dow got spanked for 265 points, or 2.2%, and finished at 11,866. The blue-chips looked more like red-chips as all 30 Dow stocks ended the day negative. The index went out on its lows and we mentioned in our Weekly Wrap there was a chance we could see 11,600 this week which is the March lows. Despite the drop, believe it or not, the Dow is still up 2.5% year-to-date. However, if 11,600 fails to hold, then the fat lady will be singing.
The S&P tanked 33 points, or 2.6%, and settled at 1,254. Over the past 7 sessions, the index has lost a whopping 7% and is now negative for the year (-0.3%). On Sunday night and Monday morning we said if the index failed to hold 1,275 we could see a quick drop to 1,250 which is strong support. Bingo. The mid-March low is 1,249 and if the bulls cannot hold this level, 1,225 will come into play.
The Nasdaq got yanked for a 75 point loss, or 2.8%, and ended at 2,669. The index fell through the 2,700 level which also represented the 200-day moving average and now faces risk down to 2,650 first, then 2,600 which is the March lows, if things don’t get better in a hurry. For 2011, the Nasdaq is up by the slimmest of margins (17 points) and will need to hold 2,652 to keep its gains.
If the aforementioned numbers fail to hold then we could be losing the bull market that has been so strong since 2008 and a trend change could-be-ah-happening.
Futures are showing a little pop this morning. Dow futures are up 49 points to 11,853 while the S&P futures are higher by 7 points to 1,254. Nasdaq futures are up 10 points to 2,299.
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