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business newsStock Market Indices: Where Are We Now?
When this type of precipitous sell-off occurs, it leaves investors and traders questioning when it will end as they hold onto the fear of missing the bottom -- a big mistake.
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Technically the two eldest sisters (Dow Jones Industrial Average and S&P 500) have officially given up any kind of short-term horizontal support that was remaining. This leaves the youngest two (Nasdaq and Russell 2000) biding time. When this type of precipitous sell-off occurs, it leaves investors/traders questioning when it will end as they hold onto the fear of missing the bottom -- a big mistake. Rule number one: When the tide changes, there will be plenty of opportunity. Rule number two: Don’t guess.
Because of the technical position of the DJIA and SPX, today I’ll focus on the NDX and RUS, both of which are still holding a small semblance of horizontal support. The NDX, which happens to be down the most from its high -- just over 8% -- closed right on a critical level (2,202). With the uber short-term oversold condition, if there is to be a bounce, this is where the tech-laden index could muster the strength. If it does, this will be the opportunity for all who did NOT prepare for what’s already transpired and give a second chance to reposition. I would look for a two- to four-day bounce to retest the original break of the Broadening Wedge. If not, well… let’s just reiterate BTO's famous song, “You Ain’t Seen Nothin’ Yet!” From this break, the 200-DMA (~2,050) is less-than a "Hop, Skip & Jump."
For a “You Ain’t Seen Nothin’ Yet” kinda fall, the RUS would also have to penetrate (~770) southbound. This would also add to the precipitous nature solely because the next technical support would be somewhere in the area of 740. Conversely, if the stand does occur -- potentially due to the multitude of economic data being released today -- this will set in a short-term reprieve for the bulls. (See TAM’s on the calendar -- OTC for the week’s economics, events and earnings.)
Traditionally I discuss the probabilities of direction based on secondary indices, but as it stands -- even with my 20-years of experience -- there are too many uncertainties to ascertain a percent. Hence, my suggestion remains the same as my last two Pedagogics posts on the Buzz & Banter, “With this type of action and volatility, wait for technical confirmation before jumping sides.”
Good luck, and identify your levels!
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