Market Tumbles in 2 Day Sell Off
Last week was a 4-day week due to MLK Day. Tuesday and Wednesday were largely unremarkable, but Thursday and Friday defined the week when the major market indices declined in an orderly, but severe sell off. Volume was heavy, a sign of institutional activity selling activity. Friday, the down volume beat up volume by 11 to 1, and decliners out paced advancers by nearly 6 to 1. All three indices lost -2% on Friday and closed on their lows.
For the week, the S&P 500 had a -2.6%, the Nasdaq declined -1.6%, and the Dow fell -2.2%. The Dow and S&P fell below their respective daily 50 EMAs, although the Nasdaq is still above its 50 EMA. The rapid decline pushed the VIX sharply up to 18.14, the highest level since mid-October 2013. High VIX (fear index) often indicates a buy area, so its possible the market could bounce short-term. However, the heavy selling suggests the market will need time to digest the losses.
There were few winners on Friday. In the S&P 500, 489 stocks were losers while only 19 were winners. The usually strong, market leading stocks were not spared, and many took significant hits. At this point, the market is in a correction. It might end soon on a market rebound, but a weak rebound would suggest further downside for the market.
The intermediate-term trend is still up, but the market is under significant selling pressure.The next support for the S&P is 1,770; for the Nasdaq, it is 4,080.