I wrote in a Trader's Corner
opinion piece just the other day (7/29/14)
suggesting that, at a minimum, the S&P 500 (SPX) could easily retreat to 1926 (from 1970), which would be a 50% retracement
of its last advance; SPX closed today at 1930. The S&P and Dow were looking quite 'toppy' as I highlighted in various chart aspects in this companion article. However, the Nasdaq earlier in the week had not broken trendline support but was hitting probably technical resistance. The Nasdaq trendline breaks came today.
The S&P 500 (SPX) on daily chart basis saw a downside penetration of its up trendline yesterday (7/30/14) but today saw acceleration of selling and buyers stepping away. Still, traders didn't go heavily into puts and didn't react in a bearish panic by any means. This is fairly common when ahead of a key report (unemployment) that, it is assumed, could turn this downswing around. Doubtful, in my mind and experience as I tend to find these breaks harbingers of a correction that won't reverse on a dime.
The decisive break below the 50-day moving average will get noticed by even fundamentally oriented investors.
S&P 500, MONTHLY:
SPX reversed from its upper trend channel resistance line in the month just ended, July after getting to an overbought extreme some weeks back. An overbought situation in and off itself is not conclusive for a top but it helps set the stage so to speak when there's reversal type price action.
MONTHLY DOW JONES
As highlighted, July price action has traced out a 'key' downside reversal, even though we most often use this term as applied to daily chart. The principle is the same however. August may be tough for the bulls. We'll see.
The Nasdaq Composite (COMP), seemingly immune to a pullback, did finally pierce its up trendline today as seen on its daily chart. COMP isn't oversold yet but given the possible double top that may cap this market for awhile we may see the Index may get 'fully' oversold before its in a position to re-test prior highs.
As seen in the monthly chart highlight for the big cap Nasdaq 100 (NDX), the Index remains within its broad multiyear uptrend price channel based on the July Close. This chart pattern demonstrates the power of resistance trendlines at times to pull prices back into their prior rate of gain/price change.
GOOD TRADING SUCCESS!