It was a tranquil day until 3:40, and then the market just took a pounding, ahead of a $1.3 billion sell imbalance going into the final 10 minutes. The S&P 500 dropped almost 70 bps in that time.
The big thing on Tuesday was the index falling below the March 2020 uptrend again. I think this is a big negative and likely to see more follow-through lower today.
You can see in the chart that we fell below that trend line around 2:30 and then snapped higher, retesting it. Once it failed, it would be lights out for the index, which is why I think we’ll see more selling pressure today.
Additionally, the Russell 2000 looked fragile, with a big broadening wedge pattern that failed at the worst possible time. This does not bode well for the small-cap index.
It seemed like Square (NYSE:SQ) was still melting. The stock was up more than 3%, yet it managed to finish flat on the day. Maybe it was just a pause in the melting, but once support at $200 breaks, it should result in a decline to $173.
I’m messing around with this idea that Amazon.com (NASDAQ:AMZN) has completed its first wave lower and that we are just about finishing up wave 2. If that is the case, the next leg lower could be a decent size drop, pushing the stock down to 2,870.
The chart for Home Depot (NYSE:HD) didn’t look good at all, sitting on major support at $316. Once that support level breaks, long holders better hope that $308 doesn’t crumble. If it does, there is a long-very long way down.
Lumber reminds me a lot of when I use to trade in exotic parts of the world, like Sri Lanka or Kenya. Lumber has that feel to it, thin markets; everyone knows a big buyer or seller is in the market. Lumber is a thin market, no doubt, but if the 50-day moving average does not hold, then the decline will likely continue.
Somebody wants out and is having a tough time. Reminds me of Pakistan in 2009. Every day the market would open for 15 minutes, and as soon as the main index was down 5% or something to that effect, the exchange would close for the day. Trying to sell in that type of environment isn’t easy.
Zoom Video (NASDAQ:ZM) was back over $300. The only problem was that the stock appeared to be facing a strong level of resistance, around $325.