Taper Fears Dominate Trading
On Wednesday, the market opened flat but quickly declined off the open. By the noon hour, the Nasdaq had already fallen -30 points. Price consolidated during the midday, and then the market began to decline again after 3:00 p.m., accelerating into the close. It was the biggest decline in a month, and the biggest 2-day drop since early October. The Nasdaq closed near the key 4,000 level (4,003).
The Nasdaq fell -56 points (-1.4%), the S&P dropped -20 points (-1.1%), and the Dow declined -129 points (-0.81%). NYSE declining stocks beat advancing stocks by a ratio of over 5 to 1 and down volume dominated up volume by a ratio of 6 to 1. The volume for both the S&P and Nasdaq was above average, so this was a broad sell off with strong intensity.
Today's market action had the character of profit-taking in an extended market. Investors may also be locking in profits ahead of next week's Fed meeting where investors will look for guidance on tapering of the bond-buying program.
The long-term trend is still UP. The S&P, Nasdaq, and Dow are all above their respective 50 EMAs. However, if the indices test as far down as their 50 EMAs, there can be a significant decline before the market can find support.