The decline today in the markets has done quite a bit of technical damage. It will not be a one day event and then back to normal for next week. The S&P chart below for 2016 shows the fall today which is the largest in 10 months. The collapse today wiped out all the gains for 2016. That is not as important as is the inability of the S&P to push beyond 2100 repeatedly since mid-2015. The drop today sets the market up for further downside action next week.
Looking at momentum you can see that the collapse of stocks back in January over fears of a China economic slowdown had much stronger negative momentum than we saw today. There is plenty of room for momentum to build to the downside next week.
SPX For 2016
NASDAQ Index Chart for 2016
The NASDAQ Index chart shows the same pattern but is by far weaker. This is obvious not just by the chart but also by the advance decline numbers which week after week have not been supportive of rally. Looking at the NASDAQ this year, it has not been able to recover 5000. Today’s drop of over 4% shows that while we have a bullish candlestick for a rebound on Monday, momentum was far more negative in January. Today we can see a small dip lower in negative momentum but overall there is a lot more room for downside action. The NASDAQ closed the day technically in a correction. This though is not the first time this year the NASDAQ has been in a correction.
NASDAQ For 2016 to Jun 24 2016
One Day Event
So is today a one day event? I don’t think so. The technical charts certainly don’t think so. Instead all indicators point to a rebound attempt on Monday that will fail and then more selling. Tuesday probably has a better chance to shake investors out of positions and then build some strength back to the upside. However a recovery to 2100 for the S&P for next week looks out of the picture, the technical charts are reviewed.
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