Stocks Fall Sharply As Fundamental Shifts Begin To Take Shape

The S&P 500 was about 4% from its 200-day moving, a level that many people will watch but offers little if any support on a historical basis. The S&P 500 has generally cut right through the 200-day moving average during actual periods of market worry such as 2015/16, 2018, and 2020.

Now the 200-week moving average is a different story, with it only failing meaningful during the 2008 meltdown and the 2020 COVID meltdown. But if we are heading to the 200-week moving average, we have merely brushed the decline’s surface because that average is somewhere around 3,200.

There are fundamental reasons for the recent decline in the market; this isn’t a technical adjustment being made. There are multiple issues with this market, such as high valuation, a Fed that is due to become less friendly, slowing GDP growth, slowing earnings growth, and the potential for a disappointing earnings season. Not to mention the index isn’t even oversold yet, so there is a good chance we see 4,240 in the coming days. Once we fell below 4,306 Monday, the index was unable to rise back above it. I go through all of the fundamental shifts in the YouTube video below.

From a technical standpoint, it almost appeared there was a head and shoulder pattern formed in the index, with a neckline that had already broken.

The VIX index hardly moved Monday, rising to 22.95. For now, the VIX appeared to be settling into this 23 region, and it was interesting because it implied about a 1.5% daily move in the S&P 500. Given the recent volatility in the market, it would explain why you haven’t seen the VIX move lower as we saw during previous sell-offs. Additionally, it seemed the VIX could be setting up for a higher spike.

Today, we saw the selling pressure on the mega-cap names pick-up, with Facebook (NASDAQ:FB) falling nearly 5%. I have never been a fan of Facebook, and the latest news isn’t going to help the stock. At time of writing, support was at $325, and you have to hope that holds; otherwise, we could be looking at $315 as the next stop or, worse, $299. (NASDAQ:AMZN) fell to support yesterday at $3,200. It was an essential level for the stock, as the next level of support doesn’t come until $3,020. I know it was oversold based on the RSI, but that doesn’t always mean something because it can become more oversold. Besides, the pattern suggested the RSI will make a lower low, which means $3,020 was probably on the way.

Roku (NASDAQ:ROKU) is getting close to going over the cliff at $287. It isn’t that I don’t like the product; I think the stock is overvalued and not appropriately priced given what the product is. Anyway, after $287 comes $228, and after that, $151. That could be the most perfect double-top pattern I have ever seen.

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