Selloff hammers the market
Watching the Dow tick away nearly 240 points today shows how much weakness still exists in today’s market. Without huge positive news, the market is slowly falling into a sell-off powered by recent profit taking. After the Dow rallied for a week, investors were already pulling the trigger and cashing in, it seems like no one wants to hold onto US equities for longer than they have to. A modest week long rally comes to a close with a slide of 240 points.
It seemed like there wasn’t a time today that the market wanted to buy. The market was buying a little near the 11300 level but after that it seemed that it was a market only for sellers. Any kind of negative sentiment appeared quickly in financials, rising oil prices for whatever reason have a profound impact on the finance sector. This market needs a catalyst and needs it bad, without anything to give the market a boost we’re nearing a freefall of selling and little to no buying.
Above is a chart of the DJIA over the last five years and all of the major trendlines that are currently in play. The Dow has about 300 points until the important horizontal support of 10800 is tested. Behind that, there is little support at 10400 and naturally the 10000 level. At those prices we should be worried about a full on bull market slide. Luckily for the market, most of the short selling is already in position, as the market slides there should be some reasonable buying to cover shorts. This is one thing the market does have in its favor.
Looking up there is plenty of resistance. 11667 is very strong horizontal resistance, 12000 hits a strong trend, next ceiling at 12200 has some power too. Right now the dow is playing with the uptrend at 11600. Plenty of resistance and minimal support.
Hi Jordan,
I did a similar analysis on my blog, and the fibonacci retracements match up pretty closely with your support and resistance numbers. In fact, the 1 week rally took us right up to a 38.2 retracement, and I’m waiting to see if that number holds for confirmation that the downtrend will continue.
I completely agree that the market needs a strong catalyst before it can make a real recovery. In my opinion we need a rally in the dollar, a reduction in commodiy prices, and some stability in the housing and financial sector. that’s a pretty tough recipe to “cook up” in a short period of time, which is why I’m predicting the downtrend to continue. What do you think?