Today we got some follow-through to the selling that began in the middle of last week. The NASDAQ led the way with a 2% loss, while the Dow and S&P 500 dropped about 1.4%. Since volume contracted today, it looks like buyers are stepping aside in advance of the Federal Reserve’s announcement on Wednesday. But even though volume dried up, there’s still reason to be concerned. The Fed decision is coming at the same time that the indices are testing those June 9th lows. If those levels break (972 on the S&P, and 1,597 on the NASDAQ), that will confirm a double top. The NASDAQ got very close to that level today, hitting 1,601 before bouncing. It’s also closing in on the trendline that’s provided support three times since March. The S&P still has a way to go before it tests its trendline. It seems pretty clear that the Fed decision will be the determining factor on whether we bounce in this area, or continue downward.
Here are the charts:
You have discounted the contraction in volume, but how about the lows on the stochastics? We have rallied sharply the past two times around here. Third time’s a charm?
I also find it funny how the market seems to make sure to sink before most Fed cuts – as if to reinforce the message that the Fed MUST cut..or else. I am looking ahead toward what earnings will hold right around the corner…
Why do you say I’ve discounted the volume contraction? The drop in volume is what makes me think people are waiting for the Fed. The reaction to that decision will trump any technical indicator, IMO.
Ah, OK. I hear ya now.