9:00am (EST)
The bears pushed their winning streak to 6-straight sessions on Wednesday after punishing the bulls for another 2% loss. The selling pressure picked up into the close and another layer of support was cracked.
The Dow fell 236 points, or 2.1%, to finish at 11,257. The index easily fell through the 11,400 level which was tripped shortly after the start of trading which opened the door for a test down to 11,200. Given the damage at the close with the blue-chips going out on their lows, we could see 11,000-10,800 come into play in today’s shortened session. The bulls will try to capture 11,350-11,400 going into the weekend.
Side note: Dow component, Bank of America (BAC, $5.14, down $0.23) hit a fresh 52-week low after losing another 4% and looks cheap enough now to start half positions. If the stock falls to $3, buy the other half, and your average cost is now $4. In a year (or two) when it’s a $6 you will have a 50% return.
The S&P 500 dropped 26 points, or 2.2%, to end at 1,161. We mentioned earlier in the week it would be important for 1,175 to hold and we penciled in a test to 1,150 if it didn’t. It now appears the S&P could trade down to 1,125-1,100 if the bulls don’t rebound today or Monday.
The Nasdaq tanked over 60 points, or 2.4%, to settle at 2,460. We have outlined the importance of the bulls holding 2,500, after 2,600 failed last week, but there is now further risk down to 2,400-2,350.
As dire as the selloff has been, one interesting note has been the action in the S&P Volatility Index (^VIX, 33.98, up 2.01) which only gained 6% on Wednesday. The index has failed to crack 36 all week so watch this level closely over the next few sesions.
We will go over all of the charts on Monday but we are looking at getting into a trade today. Subscribers, check the Members Area for the current updates and pay close to attention to our Watch List which has a number of trades that are looking good.
Futures are showing another lower open and look like this: Dow (-10), S&P 500 (-3), Nasdaq (-2).
