By Michael Ashbaugh, MarketWatch
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Technically speaking, a massive single-day market downdraft has inflicted damage to the U.S. benchmarks’ bigger-picture backdrop.
Amid the cross currents, the S&P 500 has violated several inflection points — including the 50-day moving average — with a downdraft placing major support (3,215) firmly under siege.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.36% hourly chart highlights the past two weeks.
As illustrated, the S&P has plunged to a lower plateau from recent record highs.
Consider that Monday’s session low (3,214.6) matched major support (3,215) a key intermediate-term inflection point, detailed repeatedly.
Conversely, Monday’s high (3,259.6) closely matched the S&P’s former breakout point (3,258).
Slightly more broadly, the downturn originates from last week’s close (3,337) matching the S&P’s first notable support.
Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.62% has plunged to two-month lows.
Monday’s 1,031 point downdraft marked its third-biggest point drop on record. (To be fair, the downturn also marked something like the 220th worst daily percentage drop.)
Tactically, the bottom of the gap (28,403) marks an inflection point, though resistance is better illustrated on the daily chart.
Similarly, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.35% has extended a downdraft from recent record highs.
Here again, the downturn originates from last week’s close (9,576) matching the Nasdaq’s first notable support (9,575). This area is also illustrated below.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has gapped first under its first notable support points at 9,575 and 9,450.
Moreover, Monday’s close registered under the 50-day moving average, currently 9,249, for the first time since Oct. 10. The downturn raises the flag to an intermediate-term trend shift.
Tactically, a swift reversal atop the trendline, and the breakdown point (9,450), would neutralize the downdraft. The pending retest from underneath should add color.
Looking elsewhere, the Dow Jones Industrial Average has registered a more damaging downdraft.
As illustrated, the index has plunged to two-month lows, punctuating a modified double top defined by the January and February peaks. Its prevailing backdrop supports a firmly bearish intermediate-term bias.
Tactically, notable resistance spans from 28,169 to 28,175, levels matching the January low and the November peak. A close higher would mark a step toward stabilization.
More distant inflection points match the 50-day moving average, currently 28,798, and the former breakdown point (28,872).
Meanwhile, the S&P 500 has plunged from recent record highs, registering its worst single-day downdraft in just over two years.
The downturn punctuates a violation of trendline support closely tracking the 50-day moving average, currently 3,277. This marks the S&P’s first close under its 50-day since Oct. 9.
Separately, the initial downdraft has nailed major support at 3,215, a key intermediate-term inflection point.
The bigger picture
As detailed above, technical damage has been inflicted to the U.S. benchmarks’ bigger-picture backdrop.
Though one day rarely alters a trend, Monday’s massive plunge may be an exception. Each big three U.S. benchmark concurrently registered a single-day downdraft exceeding 3.3% for the first time since 2018.
In the process, each index has violated several key levels, including the 50-day moving average.
Moving to the small-caps, the iShares Russell 2000 ETF has also turned lower, knifing under its 50-day moving average amid increased volume.
The downturn originates from former support. Recall that last week’s close (167.10) almost precisely matched its first notable floor (167.12), an area detailed repeatedly.
(Combined, the S&P 500, Nasdaq Composite and Russell 2000 closed last week on key support, leaving them tenuously positioned for Monday’s massive downdraft.)
Meanwhile, the SPDR S&P MidCap 400 ETF has reversed sharply from last week’s nominal record high.
Here again, the strong-volume downdraft places the mid-cap benchmark firmly under its 50-day moving average.
Looking elsewhere, the SPDR Trust S&P 500 has violated key trendlines, and the 50-day moving average, amid a volume spike.
From current levels, inflection points match the 2019 close (321.86) and the January low (320.73). A violation of the latter would mark a “lower low” more firmly signaling a trend shift.
Beyond technical levels, Monday’s market breadth registered bearish extremes in the form of a 10-to-1 down day. (A “down day” means that declining volume surpassed advancing volume by the stated margin. Note that Nasdaq breadth registered as comparably tame, a less than 4-to-1 down day.)