Markets continue to be on fragile ground and this should not be a surprise given that the key stock indices were unable to break or hold above some topping resistance on the charts. The failure to break higher was a red flag and a signal of further potential downside weakness to come. All four of the key stock indices are currently negative this year and fighting to find some support.
On the charts, the stock indices are trading at a crux at the key moving averages (MAs), but below the tops on the charts as follows:
Russell 2000 — 675
DOW — 10,650
S&P 500 — 1,125
The DOW has broken below its 50-day and 200-day MAs as of August 19, while the NASDAQ is below 2,200 and its 50-day and 200-day MAs. The S&P 500 failed to break its key 1,100 level on August 18, and it is back below its 50-day and 200-day MAs. The Russell 2000 is below its 50-day and 200-day MAs.
While there is some decent support on the charts, we are seeing a “death cross” on the charts for all four stock indices. This is a situation in which the 50-day MA is below the 200-day MA. This is a dangerous bearish indicator. I’m not trying to scare you off; I’m just warning you to be on alert.
My near-term technical assessment is as follows:
The near-term technical picture is moderately bearish on weak Relative Strength (RS), so there could be more downside moves. The index needs to break 2,320 in order to gain ground.
The NASDAQ is holding below 2,200 and its 50-day MA of 2,229 and 200-day MA of 2,270. Be careful, as the 50-day MA remains below the 200-day MA. The index is oversold.
The near-term technical picture for the DOW is moderately bearish on weak Relative Strength. The DOW has broken below its 50-day MA of 10,302 and 200-day MA of 10,451.
Be careful, as the 50-day MA is below its 200-day MA. There is a bottom around 9,800 on the chart. The index is overbought.
In the broader market, the near-term technical signals for the S&P 500 are moderately bearish on weak RS, so there could be more downside moves. The S&P 500 is holding above the key 1,040 level, but is back below its 50-day of 1,089 and 200-day MA of 1,116. There is a top around 1,125. There is key support around 1,040 on the chart. Be careful, as the 50-day MA is below its 200-day MA. The index is overbought.
The near-term picture for the Russell 2000 is moderately bearish on weak RS, so there could be more downside moves. The index trades with the economy. The index has fallen below its 200-day MA of 644, as well as its 50-day MA of 642. Watch for key support at 600. There is some topping on the chart around 675. The index is overbought.