By Michael Ashbaugh, MarketWatch
Editor’s Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column each market day, click here.
Technically speaking, the major U.S. benchmarks continue whipsaw amid a pronounced, and historic, market volatility spike.
Against this backdrop, the S&P 500 has reversed from 14-month lows early Tuesday, rising in the wake of a severely damaging market downdraft.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.24% hourly chart highlights the past two weeks.
As illustrated, the S&P remains under persistent pressure.
Consider that Monday marked a 325-point, or 12.0%, single-day downdraft, its largest daily plunge since 1987.
Tactically, near-term overhead broadly spans from about 2,478 to 2,532 — detailed previously — the former matching last week’s low (2,478).
Also recall that last week’s close (2,711) closely matched the S&P’s 20% pullback level (2,708.9).
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.13% is struggling to find a floor.
In its case, the index plunged 2,997 points Monday, or 12.9%, also marking the biggest daily downdraft since 1987.
Here again, a near-term inflection point matches last week’s low (21,154).
Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.92% is also trending firmly lower.
Consider that Monday’s 970-point, 12.3% downdraft marked its largest single-day percentage drop on record.
The prevailing downturn originates from last week’s close (7,875) slightly above the 20% pullback level (7,854).
Widening the view to six months, the Nasdaq has fallen off a cliff.
The prevailing leg lower punctuates a failed test of the breakdown point (8,339) from underneath. Recall that last week’s closing peak (8,344) closely matched major resistance.
Once the Nasdaq stops plunging from well-defined overhead, the flag will be raised to potential stabilization.
From current levels, near-term resistance matches last week’s low (7,194).
On further strength, firmer overhead spans from 7,700 to 7,712, levels matching the October low and the bottom of the gap.
Looking elsewhere, the Dow Jones Industrial Average has registered three-year lows.
Recall three headline inflection points, detailed previously:
The 20% bear-market pullback level (23,641).
The Dow’s 200- week moving average, currently 23,630.
The top of the gap (23,328).
Against this backdrop, last week’s close (23,185) registered under the inflection points. This marked the Dow’s first weekly close under its 200-week moving average since September 2010, as the financial crisis receded. (The Dow’s four-year chart and 10-year chart illustrate the 200-week moving average.)
More broadly, the Dow has plunged more than 9,000 points across just over four weeks. Though due a corrective bounce, the downdraft has inflicted major technical damage. The Dow has asserted a firmly-bearish intermediate- to longer-term bias pending repairs.
Meanwhile, the S&P 500 continues to whipsaw amid a pronounced, and historic, volatility spike.
Technically, recall that Wednesday’s close (2,741) matched major support (2,742). The S&P plunged 9.5% in Thursday’s action.
The index subsequently spiked 9.3% Friday, a move punctuated by Monday’s 12.0% plunge, its biggest downdraft since 1987.
The stretch of 10% daily moves — in alternating directions — is consistent with crash-like market price action.
The bigger picture
Collectively, the early-2020 technical breakdown remains underway.
Consider the scope of each benchmark’s plunge from its recent record close to Monday’s close: