The bears had a lot of momentum heading into Monday’s open as headline from around the globe pushed most equity markets lower before Wall Street even opened for business. China came out Sunday night with disappointing manufacturing numbers which weighed on the Asian and European markets while political uncertainty in France also played a role.
The talking heads were encouraged the market finished off its lows but the damage is just beginning if the bears can crack just one more layer of support. It’s funny how the market pros have been calling for a pullback all year and when we finally get one, they panic. After touching new lows they find themselves rooting for a positive close and expect the market to set new highs. This is why they make charts and this is why we tell you not to listen to the suit-and-ties.
The Dow declined 102 points, or 0.8%, to close at 12,927. The index traded to a low of 12,845 but still held current support at 12,800. The ferocious drop of nearly 200 points at the open had us excited as we were able to take profits in 4 trades. We were hoping for a close below support but resistance is back at 13,000 again and we got a lower low.
The S&P 500 gave back a dozen points, or 0.8%, to finish at 1,366. 94. The index bottomed out at 1,358.79 and we are looking for a move below 1,350 this week.
The Nasdaq got hammered for 30 points, or 1%, and ended at 2,970. Tech kissed a low of 2,946 and we were rooting for a close below 2,950. Although we didn’t get it, the action could be a preview of a 100-point drop that is about to take place.
The Russell 2000 also fell a dozen points, or 1.5%, to settle at 791.85. The small-caps traded down to 785 and below 800. We said to look for a push down to 780 which opens the door for a test to 750.
The S&P Volatility Index ($VIX, 18.97, up 1.53) jumped above 20 to a high of 20.27 to start the session but faded as the bulls bounced off the lows. The index still finished up 9% and closed above 17.50 after breaking above its 10-day moving average.
Futures are pointing towards a mixed open and look like this: Dow (+20); S&P 500 (+1); Nasdaq (-7). Subscribers, check the Members Area for the trade updates.