Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Tuesday, January 6, 2015

S&P Loses Short-Term Support, Closes Tuesday at Long-Term Support

The stock market suffered another wave of selling Tuesday quickly breaking through the short-term support I focused on in Monday's article.  Tuesday's close left all four equity indices sitting at major moving average lines and at the bottom of long-term channels.  

In the top chart above of the S&P we see that it touched down to its lower channel line and its 150 day SMA line shown in blue.  In the second chart above of the NASDAQ we see that it touched down to its lower channel line and its 100 day SMA line also shown in blue.  These indices cannot move much lower without causing a break of both the moving average and trendline support for both.  

In the next two charts above, we see that the DOW & the Russell 2000 both touched down to their 100 day SMA lines shown in blue.  The DOW & Russell 2000 are in a slightly different situation from the S&P and NASDAQ as they could slip through the SMA support and could still catch the support of the lower channel line just below where they are at now.  

The Fed really needs to step in here as there is too much long term support under all four indices to have them all fail at the same time.  If the market does turn red Wednesday we can't rule out the possibility of a "hard test" of the support lines where they slip through but then come right back up topside printing a bullish hammer candle in the process.  They could also come in on the futures and we could have a gap up open Wednesday which could then force a short squeeze or there could simply be too many sellers weary of the fact that the S&P has tripled in six years and has its newly opened yearly candle grossly overextended from its year 20 EMA line as I showed in the last chart of Monday's article.

Trade well my friends