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And Just Like That

No, it's not the next chapter of the Sex and the City reboot now called . Rather, just like that, after Tuesday's drubbing, the stock market is either hanging by a thread or over the cliff already. It's something we mentioned on Sunday's Weekly Market Outlook... the prospect that both the S&P 500 as well as the Nasdaq Composite were both within striking distances of major technical support. The S&P 500 is testing that key floor as of right now, while the composite has already broken under the last of its key support lines. As is usually the case, a picture is worth a thousand words, and best explains what just went wrong (for the bulls). Let's start with a look at the daily chart of the Nasdaq. As we've previously discussed, the index's pullback from November's highs has been chipping away at potential support offered by key moving average lines, and the straight-line support that had connected all the key lows going back to March (orange) was broken two weeks ago... and rebroken last week. The last remaining floor was the 200-day moving average line (green) at 14,721. Well, as the chart below makes clear, that support line is no longer acting as support. (Click on image to enlarge) The S&P 500 isn't quite as far gone. As the image below shows us, the index closed under its straight-line support (pink) that's been steering it upward since 2020. The 100-day moving average line (gray), however, appears to have stopped Tuesday's bleeding at the last possible moment. Today's close was right at the 100-day line, at 4577. (Click on image to enlarge) Also take note of the fact that while the S&P 500's volatility index didn't, the Nasdaq Composite's volatility index punched through a key ceiling at 28.7. While the long-term rally is now clearly on the defensive, it's too soon to say a more prolonged corrective move is guaranteed. There's still a chance the bulls could step up and put an end to the weakness. Indeed, the S&P 500 hasn't even yet broken down... at least not broken under one of its key technical floors.

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