Tech Slip Crushes NASDAQ

Equity markets continued their decline last week on renewed fears of a global slowdown.

One again, the NASDAQ led the way to the downside, declining about 2.7% for the week.

Volume was very heavy for the week, rising to a level we haven't seen since mid-2010.

For the month of March, the S&P 500 is currently lower by about 3.6%, and the NASDAQ is down roughly 5%.

Given the duration and magnitude of the recent decline, there is a high probability that we are currently in a corrective phase. Therefore, investors should trade with extreme caution until it is clear that the markets have reentered a new intermediate uptrend. (Image: damianmorysfotos on Flickr)

Lets take a look at some of the short-term support/resistance levels to watch based on last week's price action. First, there is a decent chance that the 1300 support level (which has now been violated) will serve as a new resistance level. Also, Wednesday's low near 1250 is a key support area to watch over the short and intermediate-term.

 

 

Moving on to the daily chart, we can see just how quickly the market deteriorated after breaking down through the highlighted consolidation range.

Now, we are now trading below all key intermediate-term support levels (20/50-day moving average lines).

My rules are very simple, when the market is trading below these support levels, its fair to assume that the intermediate-term trend is either down, or under extreme pressure.

Either way, I avoid chasing overheated breakouts and crazy momentum stocks until it is clear the uptrend has resumed.

 

 

In the end though, this is a long-term update, and we focus on the big picture.

Is there any reason to think that this multi-year bull market is over? At this point, unlikely. Until we see the confirmation of a major intermediate-term lower low, or lower high, the long-term bull market remains in play.

What are some of the key support levels that we would need to see taken out here? Well on the NASDAQ, this means a clear break below 2500, and on the S&P 500, we would need to see 1230 taken out.

While increasingly unlikely as the markets move lower, it still appears as though the NASDAQ may be setting up for a key retest of the 2007 bull market high. On October 31st, 2007, the benchmark index hit 2861, a level that would ultimately serve as the peak of a five year bull market. A clean breakout through this highlighted resistance level would be an important psychological milestone for this bull market.

Key intermediate-term levels to watch on the NASDAQ include resistance at the 2007 bull market high (2860), and support near 2500.

On the S&P 500, keep an eye on resistance near 1350, and the 10-week moving average support line near 1230.

 

 

Our Dow Theory outlook has been updated with new potential intermediate-term support levels. These areas have been circled in blue.

The Dow Jones Industrial Average and the Dow Transports simultaneously confirmed new bull market highs recently, and key intermediate-term support levels have been updated accordingly. There are no other changes to our Dow Theory outlook, and we remain on a long-term buy signal.

 

 

The Dollar Index resumed its decline last week, falling nearly 1.4% to a fresh multi-year low.

We have decisively violated the key long-term support trendline (green), and there is a good chance that the next stop will be a test of support near $75.

At this point, the long-term trend is still bearish, as we remain on a 10/40 week MA sell signal.

 

 

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