By Michael Ashbaugh, MarketWatch
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Technically speaking, the major U.S. benchmarks have staged a sharp August downdraft, selling off aggressively from recent record highs.
The downturn has inflicted broadly-based damage, raising the flag to a bearish intermediate-term trend shift, pending repairs.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +1.48% hourly chart highlights the past two weeks.
As illustrated, the S&P has plunged from recent record highs.
The downturn has punctuated a violation of last-ditch support (2,912) an area that closely matched last week’s low (2,914).
Moreover, the S&P has concurrently violated its 50-day moving average, also consistent with an intermediate-term trend shift.
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +2.21% has staged an aggressive August downdraft.
The downturn has thus far been underpinned by the 200-day moving average, currently 25,556.
Conversely, the 25,950 area pivots to resistance, a level matching the April gap, better illustrated on the daily chart.
Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.77% has also plunged from recent record highs.
The downturn has thus far been underpinned by major support — the 7,670 area — better illustrated on the daily chart below.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has plunged as much as 668 points, or 8.0%, from the record close established July 26.
Recall that notable support matched the July gap (8,059). The Nasdaq’s violation marked a material “lower low” signaling an intermediate-term trend shift.
More immediately, the downturn has been underpinned by major support (7,670) a level matching the late-2018, mini-crash range top. This area corresponds with the S&P 2,817 support — also the S&P’s mini-crash range top — and the quality of the prevailing rally from major support will likely add color.
Looking elsewhere, the Dow Jones Industrial Average has fallen off a cliff.
In its case, the blue-chip benchmark has plunged as much as 1,836 points, or 6.7%, from the record close established July 15.
Tactically, the 200-day moving average, currently 25,556, has initially offered support.
Conversely, notable resistance (25,950) matches the April gap and the June breakout point. Tuesday’s early session high (25,946) has matched resistance and the retest remains underway.
Meanwhile, the S&P 500 has plunged as much as 204 points, or 6.7%, from the record close established July 26.
Tactically, the August low (2,822) has thus far registered slightly above the 2,817 support, a level defining the late-2018 mini-crash range top. This area corresponds with the Nasdaq 7,670 floor, and the quality of the prevailing rally from major support will likely add color.
The bigger picture
As detailed above, the major U.S. benchmarks have started August with a damaging downdraft, plunging aggressively from recent record highs.
The downturn has inflicted material damage, knifing straight through all kinds of potential support.
Moving to the small-caps, the iShares Russell 2000 ETF has gapped under its 200-day moving average, currently 151.12.
The downturn has been fueled by a sustained volume spike, punctuating a failed test of the range top. Bearish price action.
Meanwhile, the SPDR S&P MidCap 400 has also plunged from its range top amid increased volume.
A retest of the 200-day moving average, currently 340.70, remains underway. Delving slightly deeper, the former range bottom (337.30) remains an inflection point.
Combined, the August downdrafts have wrecked what seemed to be setting up as a healthy late-July rotational move toward the small- and mid-caps.
Looking elsewhere, the SPDR Trust S&P 500 has also turned lower amid a volume spike.
In the process, the SPY has tagged two-month lows, knifing sharply under its breakout point and the 50-day moving average.
Major support violated amid strong volume and bearish internals
Returning to market breadth, downside momentum accelerated Monday amid market internals that registered bearish extremes.