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Plane crash in Milan has traders edgy

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Stocks fell to their lowest levels of the session within the past hour after reports that a small tourist plane had crashed into a skyscraper in Milan, Italy. Reports continue to come out of Italy that the pilot may have sent and SOS broadcast just prior to its hitting the Pirelli building.

The plane crash some just after a March 27 warning from the U.S. embassy in Rome, in which the embassy had issued a warning of a possible threat to U.S. citizens from extremist groups in the cities of Venice, Florence, Milan and Verona on Easter Sunday.

Dow Industrials Chart - Daily Interval

The Dow Industrials (INDU) have recovered from its session lows as reports look to be that of the plane in Milan was in trouble due to a mechanical problem as the pilot apparently broadcast an SOS signal prior to impacting the Pirelli building.

While today's news of the plane crash did create some downside in the Dow Industrials, we will note that the INDU has broken below its upward trend dating back to the September lows. It would currently take a break back above the 10,400 level for us to be observing technical strength. For now, the Dow looks range-bound between 10,000 and 10,400.

S&P 500 Index Chart - Daily Interval

Much like the Dow Industrials (INDU), the broader S&P 500 Index (SPX.X) has recovered from their lowest levels of the session. The recent break of upward trend is concerning to bulls, but the SPX did recently find support at the psychological round number of 1,100 and has not come close to testing that level despite today's turmoil. Bulls are advised to be cautious in their trading until some type of move back above the 200-day moving average is experienced (currently at 1,133). For now, current technical support looks to be the 1,086.5 level.

I also want to tell traders that we are starting to see some internal repair take place in the NASDAQ-100 Bullish % ($BPNDX) from www.stockcharts.com. Yesterday's action has this indicator reversing back into "bull confirmed" status, which is very similar to what we witnessed in early February. I discussed this last Thursday morning in the 09:00 EST Update under the heading "Tighten down those stops." Traders may want to review those notes as it has us on the alert for internal strengthening, which could lead to a rally.

Jeff Bailey
Senior Market Technician
Option Investor

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