What a day it was on Tuesday! The major indices broke below their support levels and made their lowest close in months! The Dow lost more than 200 points; SPX gave up more than 25; and, Nasdaq dropped more than 40 points!!
SOX took a hit also, -11.21 points. XLF closed below 33, a support that we’ve been looking at. Oil (USO) and natural gas (UNG) rose, but, oil services (OIH) declined. Housing (HGX) continued to wobble, down more than 4%!
SPX
SPX now is back below 1440, and its MACD is curving down again. There’s an immediate support at 1420, but, the stronger one is perhaps 1400.
Nasdaq
Similar story for Nasdaq. Its next support is at 2475.
The Fed took a pause on Tuesday in its open market operations. Globally, the central banks are also scaling back their cash injections. Further, news about hedge funds having redemption concerns added more pressure to the market. According to AP, "Confirmation that Sentinel Management Group Inc., which oversees $1.6 billion in assets, is seeking to halt investor redemptions exacerbated the selling. Other funds are said to have similar problems as they face withdrawal demands at a time it has become difficult to value low-quality debt." Wal Mart’s profit outlook certainly didn’t help either. All of these added together, helped to give the market its worst close in months!
Asian markets are down big, as expected. Hong Kong was down over 600 points at one point. Japan was down over 300 points. China was down nearly 100 points!
So, after over a week, we’re back to this post that I wrote 2 weekends ago, looking for new support levels! Near the end of that post, I used one of Phil’s quotes:
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"Really and truly I do not like to be a bear but I like even less to be an ostrich because we are investing real money in these markets and kidding ourselves is a very expensive game! PSW is as much about money management as it is about picking stocks as it doesn’t do you much good to have 7 out of 10 winners if you blow half your virtual portfolio on pick number 8!"
We have been cautioning people to be patient and keep mostly cash. The market has just pierced through and closed under the support levels for the 2nd time. Does this finally confirm the market’s near-term direction? CPI is coming out in the morning. Let’s see what the market futures indicate before the market. One thing to keep in mind, though, VIX is still extremely high!
Good night and HappyTrading! ™
