TGS, and the rest of Wall Street, takes a hit...
U.S. MARKETS FAIL MAJOR RESISTANCE TESTS
CINCINNATI, OH (MarketWatch - Sept. 6, 2011) - The major U.S. benchmarks kick off September with yet another sharp downdraft. Further, technically speaking, the weak start follows widespread impacts from failed tests of major resistance points.
Bearish Pricing Actions
Before detailing the U.S. markets' wider view, the S&P 500's hourly chart highlights the past three weeks. Per reporting records, the S&P topped last week at 1,230, matching longer-term resistance detailed last week. (See Aug. 23 and Aug. 30 reviews.) From current levels, initial support holds at 1,155 and is followed by a major floor at this year's closing low of 1,120.
Meanwhile, the NYSE Dow Jones Industrials index near-term backdrop is similar. Namely, the index is traversing the middle of its three-week range. From current levels, initial (though fairly week) support holds at 11,090, followed by a solid, hard deck support floor bottom-feeding down around 10,800.
And not surprisingly, the Nasdaq Composite three-week index view remains volatile. Initial support now holds around 2,437, and is followed by a deeper floor down at approximately 2,408, matching its Aug. 26 open. Widening the view to six months adds perspective. Very simply, the Nasdaq Composite failed a test of its breakdown point. (See Aug. 12 and Aug. 15 reviews.) Consider further that the Nasdaq Composite Index topped last week at 2,611 - matching resistance at 2,600 - and has since sold off sharply.
Moving to the Dow Jones Industrial Average, its six-month backdrop remains bearish. Consider that the index plunged 2,147 points from the late-July peak to the August low. This marked a 16.8% downdraft across just 13 sessions. By comparison, the ensuing rally 'attempt' remains flat, meaning that the Dow's longer-term path of least resistance technically points even lower with hard deck support deep into the high 10,000s.
Finally, the S&P 500's six-month view rounds out the benchmarks. Here again, the S&P staged a nearly straightline plunge from the late-July peak. Thus, to the extent that an immediate V-shaped reversal was possible - which, it was in reality not possible - enough time has passed that the "easy out" likely fell off the table some time ago.
The Bigger Picture Overview
The major U.S. indicators and indexes kicked off September with sharp downdrafts. Technically speaking, the weak start follows a failed tests of major resistances, starting with the Nasdaq, which failed the first test of its breakdown point. Specifically, the Nasdaq Index topped last week at 2,611 - matching the 2,600 resistance - and has since gapped sharply lower. Meanwhile, the S&P 500 also failed a major technical test. In its case, the S&P failed to reach its breakdown point - the 1,250 area - and sold off sharply from the late-August peak. Moreover, widening to the S&P 500's five-year backdrop adds even more red coloring. Consider that the S&P topped last week at 1,230, matching longer-term resistance at 1,227, detailed last week. Further, sharply negative market breadth drove the downturn like a stampede from behind. Specifically, 'down' volume painfully surpassed 'up' volume by 19 to 1 on the NYSE, and by 14 to 1 on the Nasdaq. More plainly, bearish market momentum became firmly intact and entrenched.
Summing Up the Backdrop
The major U.S. benchmarks signaled a significant downtrend beginning August 3, 2011. (See, e.g. Aug. 3 review, and the Aug. 1 review.) Fast forward to today, and the markets confirmed the substantial downturn just last week. Namely, the Nasdaq Composite plunged from resistance at 2,600 down into depths yet unknown, while the S&P 500 unfortunatley drew sellers around its major resistance.
So, looking ahead . . . unpleasant retests of the S&P's August lows are now more likely. Thus, a defensive approach remains advisable for S&P stocks (along with the broader majority of small and micro-cap stocks). Additionally, the (S&P, small-cap, and micro-cap) markets' biases technically point even lower - pending further technical repairs (within each of these respective markets). The S&P's response to support at 1,120, and resistance around 1,230, should prove a rather useful bull-bear gauge (for S&P, small, and micro-caps markets). .
Traditional Market Leaders Fail Technical Tests
Drilling down even further, consider that three key sectors also failed their technical tests: the Technology Select Sector SPDR, the Financial Select Sector SPDR, and the iShares Dow Transports. Each sector drew sellers at the August range top. Moreover, the downdraft from resistance became directionally sharp (i.e., downward), unfortunatly positioning each secton for strong retests of their August lows. Of particular note, these key sectors involve traditional market leaders; hence, their relative weakness remains a broad-market headwind.
-MarketWatch, "S&P, Nasdaq Fail Tests of Major Resistances," (Sept. 6, 2011) (emphasis and paraphrasing added).
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