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S&P-100 breaks major support as large caps weaken

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The largest of large cap indexes has the S&P 100 Index (OEX.X) 442.47 -1.8% breaking the 445 level and triggering a spread- triple bottom on our unconventional $2.5 box, which we started using a couple of months ago to try and better mimic the broader S&P 500 Index (SPX.X) 874.35 -1.7%.

While the S&P 100 Bullish % ($BPOEX) gave traders an "early" heads up back on Wednesday December 4th when this institutionally used indicator reversed into "bear alert" status, today's outward appearance of the index itself is further sign that supply is getting a more meaningful upper hand on demand for equities and continues to have the equity markets looking defensive.

After our 01:00 Update, the Dow Industrials (INDU) 8,296.79 -1.6% broke it's afternoon low of 8,350, traded the 8,345 level and quickly fell to our last intra-day target of support at 8,312. The Dow did try to firm there, but has since slipped to further lows of 8,285.14. If I quickly type in current high, low and close (current levels of trade) on the Dow Industrials, Monday's first level of resistance would be near 8,410 while first level of support would be near 8,255, with "pivot" at 8,347. Shorter- term traders trying to determine if they should carry bearish trades over the weekend can begin using this type of data to assess risk/reward, especially if holding current month (January expiration). It would be my view that a close below 8,350 represents favorable risk/reward for holding bearish trades over the weekend.

While I only discuss the Dow Industrials levels here, suffice it to say that the major indexes are trading in unison with each other. Today further downside and breaking further below the intermediate-term 50-day SMA's is viewed as a technical negative. Currenlty, the Dow, OEX, SPX, NDX and NASDAQ Composite (COMPX) are all trading below this intermediate-term moving average and also below their shorter-term 21-day SMA, and longer-term 200-day SMA's. In essence, there is no moving average that would have a short-term, intermediate-term, or longer-term bull looking to aggressively take positions.

Market volume remains light with both the NYSE and NASDAQ just pressing the 614 million and 665 million share marks respectively.

We've seen some slight breadth weakness from the 01:00 hour as NYSE decliners now outnumber advancers by a 21 to 10 margin (slightly more than 2:1), while NASDAQ breadth is equally weak with decliners outnumbering advancers by a 21 to 10 margin.

On a narrower breadth scale and tying in with large cap weakness, Dow Industrials breadth has just turned entirely negative with all 30 components now trading down on the session. AT&T (NYSE:T) $26.80, is off just a penny and represents today's relative strength winner in the Dow. However, recent rally resistance at a trending higher 50-day SMA and starting to roll lower 21-day SMA does not look to bode well for the stock on a technical basis and may have some downside near-term to the still declining 200-day SMA at $25.45, which has served as bearish support for sharp declines in mid-November and just last Friday.

Jeff Bailey

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