Last night we saw the futures slowly start to erode. Nothing terrible at first, and even this morning they were down some but nothing to lose sleep over. The S&P 500 trading around 2035/2040. Suddenly, and without warning, the futures began to fall. By the time the market opened it was pure nastiness. The market gapped down and headed right for 2020 bottoming out at 2021. From there it rocked up ten points. As the day wore on it did a double test at 2021 before trying higher again, but this move back up was far weaker.

Finally, the market broke 2020, and headed lower, closing at 2012. A breakdown. Not forcefully so, and with absolutely no volume on the move. It was a breakdown, nonetheless, below 2020 on a closing basis. When markets break price support, you need to respect it no matter whether the volume was heavy or not. No question it's more convincing if there's strong volume behind the move, but price is price and needs to be respected for what it is.

Without volume it offers up the possibility of this being a head fake below critical support, but the onus is now on the bulls to take the market back. The bears can celebrate a little bit this evening, and with many key sectors breaking down far worse than the market itself, it has to feel somewhat safer for those bears as well. Not much around to support the bulls. Add in the fact that the fang stocks took a little bit of a beating today, and you have good tidings for the bears this evening. Fang is Facebook, Inc. (FB), Amazon.com Inc. (AMZN), Netflix, Inc. (NFLX), and Google Inc. (GOOG). All of their oscillators turned bearish today as well. You never want to bet against the fang, but they aren't looking too good technically at the moment. It's a potentially important day to remember for the market. We shall see if the bears can do what they usually can't do, and that is to follow through next week.

If you study the charts tonight, you can see the world market chart, which has also gone into bear mode. With our VIX breaking out today on confirming oscillators you have to wonder if we're about to follow the same path lower with some real force behind it. A full candle stick today on the VIX isn't what the bulls wanted to see. It confirms the price action as well as those oscillators, and that's a double headache for the bulls. The VIX has made many attempts to move higher, and take the market down with it, but each and every time it had a bullish candle early in the day offering promise to the bears it, found a way to fall as the day went along, thus, printing non-confirming sticks. The end result being the bulls always finding a way to prevent a breakdown. Not that they got much going in their world either, but they at least prevented a breakdown. Today we saw the VIX fully succeed. This is yet another worry for the bulls as they realize they're facing a more difficult challenge now. We can choose to ignore what we're seeing, but that's not the best way to approach the toughest game on the planet. It's best to at least give it its due and say we have a problem. The VIX is suggesting that today's move should be respected.

While nothing is ever a guarantee in this market, price is suggesting we may be dealing with a down-trending market for a while. Not straight down. Lots of up days, but an overall trend lower. The real question we have to ask ourselves is what do we know from today's breakdown. Is it suggesting a real bear, or a correction, is what we want to understand more fully. When a market breaks down below critical support you want to look at volume. Was it accompanied by big volume suggesting big money was unloading, or was it on average volume suggesting possibly only a correction, and not the big tumble we'd see in a fiercely down trending market. There was no volume today, so if this was to become a bear we're going to need to see some heavier volume days on the days we gap down hard. So far there's nothing to suggest a bear, but that doesn't mean things can't get quite painful for the bulls. A correction is enough to cause serious pain if you're overly involved. Time will tell the tale. Like I said, maybe today was just a head fake down. We'll know more soon, but you should at least respect the move below 2020 today on the S&P 500. If we hold below 2020 for a while, there's no support until gap support at 1954/1951.

A day at a time as we discover what the markets intentions are now and in the near and long-term future. In addition to of all of that, we get big news from the Fed on Wednesday regarding an interest-rate hike. Next week will not be dull.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.