S&P 500 Index

As with all the major indices, the SPYders have broken down below almost all technical support - we have to look back several years to find where technical support can be found. At this point the 1,000 level for the S&P 500 Index (100 on the SPY) has become very significant to me from both a technical and a psychological level. As I have mentioned previously, the large round strike price numbers are watched by many market professionals and traders. We have tested this level for the past three trading days, including today. The long-awaited sharp short-term market bounceback has not yet occurred, but 1,000 on the S&P 500 is a likely place for it to occur, in my view. While a very strong short-term upmove is likely to occur, the weekly SPY chart below shows the longer-term downtrend is still in place. 1,250ish looks like a likely upside resistance level should we start moving back to the upside.

S&P 500 Index Weekly Chart (SPY)


NASDAQ 100 Index

The QQQQs are down over 30% just since mid-August. They have also fallen far below their Daily Acceleration Bands. Iit is not likely that an Index will stay far below the bands for more than a few days straight. The bottom band is currently around 36, with the middle band and 40-day exponential moving average around the key 40 strike. That area would be a likely target if we finally have a strong upside reversal. But as with all the major indices, the technical damage has been so severe that we may eventually enter a longer term downwards/sideways basing range, before any significant long-term rally can ensue.

NASDAQ 100 Index Daily Chart (QQQQ)


Dow Jones Industrial Average

The Dow Jones Industrial Average (DIA) has broken below the key 10,000 level strike, although given the recent volatility, I would not be surprised to see us push back above that key psychological level soon. The Daily Efficiency Ratio for the DIA, seen in the chart below, is off-the-charts low -- ndicating a short-term bounce is likely, in my view.

Dow Jones Industrial Average (DIA) Daily Chart


In my view, the bottom line is that we are very over-due for a strong short-term market bounce; however, I have been early in calling for this. And after the short-term rally that should be coming, there is a decent chance of another big downleg.


Price Headley is the founder and chief analyst of BigTrends.com.