After the ubiquitous ramp into the US cash market open, things have gone a little pear-shaped, with stocks tumbling back below last week’s lows and pushing critical 2018 support levels.
As BMO’s Russ Visch writes,
It’s a “make or break” day for the S&P 500, which closed right at key support at its October/November lows (2630) on Friday. If support holds here over the next few days it would build the case that a bottom is beginning to form here. Alternatively, a close below that level would signal a resumption of the long-term downtrend with a measurable downside swing target of 2445. There is support at the early 2018 lows in the 2530-2560 zone but in our opinion it will take a close below that level to cause the volatility/capitulation spike that’s been missing so far.
In our opinion, a breakdown appears to be the most likely outcome given that other, broader measures of equity participation such as the Russell 2000 and Value Line Composite indexes have already broken down.
At the same time NYSE breadth data is getting worse, not better.
Late last week the number of stocks making 52-week new lows on the NYSE jumped to its highest reading in nearly three years.
The deterioration “underneath the surface” which these indicators reflect typically only accompany continuation patterns (pauses within downtrends) not bottoming processes.
And that’s what just happened…
Breaking below the Oct lows…
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