US equities took a beating yesterday. The S&P500 cash index (SPX) closed at 2045.68. roughly 30 points below the prior close and 60 points below the recent high. The SPX closed near the low for the day on increasing volume, and now joins the DOW and the small caps in negative territory for the year 2015. Only the Nasdaq is still green for the year … so far.
What concerns investors more than a couple of days consolidation is the horrifying lack of breadth in the market. Virtually all of the positive return this year is accounted for by just a handful of stocks, notably Facebook, Apple, Netflix, Google, Nike, O’Reilly, Starbucks, Home Depot, and perhaps half a dozen others. Take them away, and 2015 would look even worse.
The S&P500 mini-futures suffered the same fate yesterday. It gapped down at the open, moved down all day, busted through the 200-day moving average, and closed at 2050.50, one point above the low of the session. It lost 28.50 from the prior close, and the volume was increasing on the downside all afternoon.
Today
The heavy downside volume, to loss of the 200-day moving average and the close at or near the low of the session are all negative indicators. The broken 200 ma (2058.50) will become the major resistance area today. The current support below that level will be the 50-day moving average line at 2032-2034.
Today is weekly option expiration day. The option battle line is 2050; Bulls will be fighting for a close in the 2055-65 zone and Bears will fight for 2040-35. Today we could see the ES chopping back and forth between 2055 and 2035 if overnight trading holds above the 2035 level.
There is an oversold condition for the short-term, and a small bounce should be expected. But as long as ES stays below 2055 it should not change the direction of the short-term downtrend.
Major support levels for Friday: 2035.50-32.50, 2025-23.75, 2016-14, 2008-07.50
Major resistance levels: 2075-78.50, 2097-95, 2114.50-16.50, 2112.75-23.50
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Chart: ESZ5 S&P500 mini-futures. Daily chart, to Nov. 12, 2015
