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Michael Ashbaugh

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March 10, 2020, 12:43 p.m. EDT

Charting a technical breakdown, S&P 500 violates major support

Focus: Crude oil’s technical breakdown, 10-year yield plunges to record low as currency cross currents persist, USO, TNX, DXY, FXY, GLD

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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 have reached multi-month lows, pressured amid the worst single-day downdraft since 2008, during the financial crisis.

Against this backdrop, the S&P 500 has violated significant support — the 2,855-to-2,873 area — inflicting incremental longer-term damage. The quality of the pending rally attempt will likely add color.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -0.39%  hourly chart highlights the past two weeks.

As illustrated, the S&P has plunged to nine-month lows.

From current levels, the breakdown point (2,855) pivots to notable resistance. Conversely, the S&P has initially maintained its next notable support (2,742), an area detailed previously.

Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.08%  has reached 14-month lows, its worst levels since January 2019.

Tactically, the June low pivots to resistance (24,680) and is followed by the bottom of the gap (24,992).

Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.20%  has reached five-month lows.

The prevailing downturn originates from major resistance. Recall that last week’s high (9,070) registered slightly under its breakdown point (9,088) an area better illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has plunged from its breakdown point (9,088).

In the process, the index has ventured firmly under its 200-day moving average, currently 8,420, for the first time since June.

More immediately, consider that the bottom of the gap (8,243) matches resistance at the September peak (8,243). A retest is underway early Tuesday, and may add color.

Looking elsewhere, the Dow Jones Industrial Average has recently whipsawed under its 200-day moving average.

Consider that the index plunged 2,014 points Monday, or 7.8%, its biggest point drop on record. To reiterate, the downdraft places the Dow at 14-month lows, its worst levels since January 2019.

Meanwhile, the S&P 500 has plunged to nine-month lows, its worst levels since early June.

Against this backdrop, the S&P has initially maintained its next notable support (2,742) — an area closely matching the March closing low (2,743) and June closing low (2,744) — detailed previously.

The bigger picture

As detailed above, the major U.S. benchmarks have broken down technically. Consider the scale of each benchmark’s plunge from its recent record close to Monday’s close:

  • The Dow industrials have plunged 5,700 points, or 19.3%, from the record close (29,551), established Feb. 12.

  • The Nasdaq Composite has plunged 1,867 points, or 19.0%, from its record close (9,817), established Feb. 19.

  • The S&P 500 has plunged 640 points, or 18.9%, from its record close (3,386), established Feb. 19.

Against this backdrop, major technical damage has been inflicted, on the order of the worst in several years, if not since the financial crisis.

Though near-term oversold, and due a corrective bounce, the prevailing backdrop supports a bearish intermediate- to longer-term bias , pending repairs.

Moving to the small-caps, the iShares Russell 2000 ETF remains incrementally weaker than the major U.S. benchmarks.

As illustrated, the small-cap benchmark has plunged to 14-month lows, pressured amid a sustained volume spike. Also note that the recent rally attempt registered as flat, fueled by decreased volume. Bearish price action.

Similarly, the SPDR S&P MidCap 400 ETF has asserted a firmly-bearish backdrop.

Here again, the MDY has plunged to 14-month lows, punctuating a lackluster whipsaw at its former range bottom.

Looking elsewhere, the SPDR Trust S&P 500 re-violated its 200-day moving average to conclude last week amid increased volume.

The downturn has been punctuated by Monday’s strong-volume plunge to nine-month lows. Tactically, the breakdown point (285.54) pivots to first resistance.

Placing a finer point on the S&P 500, the index has violated major support to start this week. The chart above spans three years, and each bar represents one week.

The specific area rests at 2,873 and 2,954, levels broadly defining about an 18-month range top.

Also recall that the February low (2,855.8) matched the October low (2,855.9).

Combined, major resistance broadly spans from 2,856 to 2,873. The week-to-date peak (2,864) has matched resistance. An eventual close atop this area would mark a step toward stabilization.

-15.88 -0.39%
Volume: 2.21B
May 16, 2022 5:14p
US : Dow Jones Global
+26.76 +0.08%
Volume: 332.70M
May 16, 2022 5:14p
US : Nasdaq
-142.21 -1.20%
Volume: 4.29M
May 16, 2022 5:16p
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