US Stocks clocked in the first 4 day consecutive decline in 2013. S&P 500 closed 0.59% lower, shedding close to 10 points, while Dow 30 fared slightly better, falling 0.47%. No one tends to batter an eyelid when told that Stock prices are falling, as this is simply the bread and butter of the market. Even the 4 straight losses in a row isn’t all that special, considering that market has seen much longer consecutive sequences in both directions all the time. In fact, looking at how prices have been rallying in 2013, it is remarkable that such a significant pullback has only been occurred now with 2 thirds of the year almost gone. So what is all these fuss about?
Well, it is interesting to note that the trading session ended with price closing near the day low. Price gaped lower on open due to risk off sentiments during Asia and European session, but nonetheless managed to push higher, with both S&P 500 and Dow 30 able to climb above last Friday’s close at one point. Prices subsequently traded lower consistently despite no apparent news events nor any significant announcements by any major corporations. One would be hard pressed to find another day as quiet as this, and it is in such quiet days that underlying market sentiment can be gauged. By moving lower without any additional drivers yesterday, it seems that market is in a strong downtrend, possibly due to renewed fears of tapering that is driving US yields higher as well.
With that in mind, it is likely that current trajectory of US Stocks will continue especially since there isn’t any major news announcements from US between now and Friday, where Jackson Hole Fed meeting will take place. This event will be highly watched by many as Bernanke is likely to reveal any potential tapering plans there and then. If we are to see a September taper, Jackson Hole would be the best time for Bernanke to prepare the market for the eventuality.
S&P 500 Daily Chart
From a technical perspective, S&P 500 is finding some support around the 1,650 level. Stochastic curve is closing in on the Signal curve, hinting that a trough will be formed soon. These suggest that a rebound off 1,650 is possible, but that would be against the analysis above which favors a continued downtrend in the next few days.
Dow 30 Daily Chart
The same could be said for Dow 30, where 15,000 support is being tested currently. Stoch readings are also pushing higher, fairly similar to those of S&P 500.
With technical analysis not really lining up with market sentiment, it is important that traders be cautious before assuming that the aforementioned support lines will hold. Furthermore, it should be noted that there are other support lines below current ones, hence suggesting that prices could still head lower before rebounding up higher. Even though Stoch curve and signal lines are converging, a proper uptick cycle is not fully formed until the 20.0 mark has been cleared, hence, it would be too hasty to simply assume that a bull cycle will be moving on from here, when readings can actually venture lower.