In our most recent review of the S&P 500 we pointed out the market was at a breaking point, with all my indicators pointing down. US markets have indeed gone over the edge last week, and the rather quick drop has brought them right to the next breaking point. Here is the current S&P chart (click for larger image):
The S&P has dropped to support at long term trend line (green line) near 1930. Will buyers appear at this level? Maybe, maybe not. None of my technical indicators show any sign of a bottom at this point, but that could change if the market manages to hang on to this 1925 level for several more days. Clearly, the prospect for new highs in August, as we discussed in last week’s post, is now a more remote scenario.
Meanwhile, the Nasdaq sits right at the 4350 level, the July lows. This keeps the possibility alive for another run to 4500+… IF buyers show up this week.
Bottom line: both the S&P 500 and the Nasdaq are at a next breaking point. And the technicals still look poor. I think the odds for a rebound or sideways “hanging-on mode” are fairly equal to the odds of a quick further drop this week. If the current support level gives way then I would look for 1880 and then 1730 as likely downside targets for the S&P 500. If buyers show up at these levels then this will be another whipsaw move that is quickly forgotten.