Today’s late market selloff put further pressure on support
levels as 69% of stocks traded today
declined while only 26%
including all of the nearly 9000 stocks traded on NYSE, AMEX and NASDAQ combined.
This is close to the Advance Decline Selling Climax levels 70% total issues declining
with no more than 15% advancing. It appears we are nearing the end of this January
selloff, which may occur as we approach the FOMC meeting next week.
The chart above shows the major market averages have caught up
with the decline in the NASDAQ and NYSE Advance/Decline Lines that has been going
on in earnest since July 2021 and more precipitously since the November highs.
NDX and NASDAQ have both hit the 10% correction level this week down -10.4% and
-11.9% respectively at today’s close. From their early January highs DJIA and
S&P 500 are down -5.7% and -6.5% respectively.
As you can see from the chart below the NASDAQ 100 (NDX) has
fallen through two support levels at 15700 and 15250 rather quickly over the
past two weeks. In the process NDX and breached it’s 50- (pink line) and
200-day (blue line) moving averages and two monthly pivot point support levels
(green dotted lines) as well as the uptrend line since the March 2021 low. NDX
currently sits just below 14900 support and right on the uptrend line from the September/October
As of today’s close NASDAQ is down 8.3% and the Russell 2000 is down 8.1%. S&P 500 and DJIA are down 4.9% and 3.6% respectively. This is the worst start to a year on the 12th trading day since 2016 when DJIA, S&P 500, NASDAQ and Russell 2000 were all down over 9%. Compared to the recent 21-year seasonal pattern for January, weakness could persist through the end of the month, but given the current magnitude of declines some modest recovery before the end of the month is also likely. One possible catalyst for a late-month rally could come from the Fed on January 26.