Updating the Selloff

The last trading day of July sure was interesting, as U.S. indexes plunged lower.  I thought I’d do a quick whip-a-round of various chartological implications.

The primary point is that U.S. indexes appear to be pulling off their highs, which has two meaningful points: 1) there is room for additional weakness before support, and 2) No major support is broken or threatened in the S&P or Nasdaq.  Yet.  First, the S&P (SPY):

2014-08-01-SPY_CHARTS

And Nasdaq (QQQ):

2014-08-01-QQQ_CHARTS

Weakness is more noteworthy in the Dow Jones (DIA), which is threatening to break a long-term support trendline:

2014-08-01-DIA_CHARTS

Small caps (IWM) have already broken support and failed on the bounce-back to resistance.  The big question is whether it will push below its lows from a few months ago:

2014-08-01-IWMI_CHARTS

Also very noteworthy is the weakness evidence in Junk bonds (JNK), which have now broken the rising support trendline from 2010 lows.

2014-08-01-JNK_CHARTS

All told, this adds up to significant reason for additional caution in my opinion.  It does not, however, indicate “the sky is falling.”  This may be a garden variety pullback.  However, small caps and junk bonds have a history of successfully forewarning of danger when risk appetite starts drying up.  Europe bears very close watching as weakness in the some of the charts I recently identified like Switzerland (EWL) and Spain (EWP) continue to accelerate to the downside.

 

 

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