So much for Obamas State of the Union overnight hope trade! Last night I showed you Screenr videos of traders bidding up the March S&P future during Obamas speech. They almost drove it to 50DMA resistance before the big plunge. Watch out for the Bernanke vote as well.
Today it looks the risk trade couldn't hold and the downtrend will resume, we will see how the markets close. Qualcomm's forecast, Greece bond sell off and US Dollar Index rise crushed the hope trade (Stocks, Greek Bonds, Commodities Fall; Dollar, Treasuries Rise -Bloomberg) Also a glitch went down at the NYSE (NYSE Says Error Delays Delivery of Price Quote Data -Bloomberg) and the Senate is voting for Bernanke's second term today (Final Bernanke vote may come Thursday, Reid says -MarketWatch). The Dow is down 149 points as of 12:32pm. Here are 9 month charts of $SPY, $IYT, $IWM, $IYR, $DIA and $VIX with trend lines, 50 day moving average and support/resistance levels.
First of $SPY (S&P 500 ETF): After the multi-day plunge a squeeze was inevitable and the 50 day moving average resistance level looked like a target. On the 9 month chart it pierced through an uptrend channel (1) and is trading at 108.12, 3 points under the 50DMA 111.36 (2). If the S&P stays weak $102.5 (3) and ultimately $95 (4) are support levels. It's just a historical look at selling exhaustion which is now considered support.
Next up $DIA (Dow): Same type of deal, it broke through uptrend support and the 50dma however it is near a support level from October at $100. That could easily get taken out but if there's a bounce it would be there in my opinion. Minor support occurs at at 97.5 and 95 it looks like. I'm thinking the 200DMA $93.20 is big support and if it breaks that $87.5 (June highs). We'll see what happens. There is always a chance it retests the downtrend demon again (long term downtrend).
$IWM (Russell 2000) broke support, trendline and uptrend.. It could test $58 - $56 (200DMA) on the downside.
$IYT (Transports): Under 50DMA, pierced uptrend and broke through a floor. Is IYT in a new channel between 68-73? We will see. $65.40 is the 200DMA and $60 is strong support IMO. MACD (moving avg momentum) is trending lower and cracked the center line, keep an eye on that and the NOV, 09 level.
And look at the $VIX, will it crack 30??
In conclusion, watch the various downtrends from the two recent peaks (lower highs). If whatever catalyst emergers (Bernanke nomination?) and SPY, DIA, IWM, IYT all crack through new downtrend resistance they could test the 50DMA again and/or downtrend demon resistance in my opinion. The steep trend is lower until it breaks, same as always. Also keep an eye on the $SPX/$USDX (US Dollar) relationship which could dictate the markets. I will chart USD next and various currencies and tech ($QQQQ) at some point.
Stock charts courtesy of Stockcharts.com.