Market Takes a Nose Dive

On Monday, the market retested the last daily swing high, and could not reach it; instead, the market fell sharply in above average volume. The sell off began at noon and continued into the market close. By the end of the day, the Nasdaq had fallen -61 points (-1.47%), the S&P dropped -23 points (-1.26%), and the Dow plunged -179 points (-1.09%). 

This was broad sell off, with decliners beating advancers by 3 to 1, and down volume besting up volume by 5 to 1. This was the biggest market loss since early November, when the Nasdaq fell -1.9%.  The Market Correction Risk Rating has been high for weeks, but the market had been able to inch higher or sell off days were at least contained. Not today. 

The market often has big sell offs, undercutting old lows, only to rebound once the weak hands have been shaken out. This can be considered normal and healthy price action. However, if the Nasdaq Composite declines below 4,100, there is reason for concern. and below 4,080 would likely mean a market correction. Since the market has been trending up for over 4 years, the potential for a bear market always looms as a possibility.