For the youngsters that may not know E.F. Hutton, when he talked, people listened.
A lot of Thursday’s talk was the market pulled back after famous hedge fund manager, David Tepper, said he was nervous with the current market conditions. Although this can be attributed to the pullback, technical analysis always trumps news that can easily be spun by the talking heads on why the market went up or down. For example, had the market finished higher, the gains could have been attributed to a better-than-expected jobless claims number.
Mr. Tepper is the founder of Appaloosa Management and has made some great calls over the past year so people are listening. However, the technical picture started to weaken on Tuesday and I mentioned if there was follow through, prior levels of support would be tested.
The Dow dropped 167 points, or 1%, to close at 16,446. The blue-chips opened a half-point lower and made an 8-point run to 16,622 before falling to a low of 16,397. Support at 16,400-16,350 held but there is risk to 16,200. Prior resistance at 16,600 is now back in play.
The S&P 500 sank 17 points, or 0.9%, to settle at 1,870. The index traded in negative territory throughout the day for the second-straight session as the bears pushed a low of 1,862. The close below 1,875 was bearish and gets 1,860-1,850 back in the mix.
The Nasdaq tanked 31 points, or 0.7%, to end at 4,069. Tech opened below the 4,100 level at 4,096 and folded like a cheap lawn chair shortly after the open. The low checked in at 4,035 and I have talked about risk to 4,050-4,025 on a close below 4,075 again. A close below 4,025 would suggest continued weakness ahead and a possible trend developing.
The Russell 2000 declined 7 points, or 0.7%, to finish at 1,095. The small-caps opened below the 1,100 level at 1,099 and bottomed at 1,082 before trying to make it back to even. I have been mentioning there is risk to 1,075 on another close below 1,100 and today’s action could provide good clues for next week.
The S&P 500 Volatility Index ($VIX, 13.17, up 1) traded to a high of 13.77 but closed below the 13.50 level. Some of the slick talking pros mentioned the VIX due to its 8% spike but STILL discounted the importance of the index.
May options expire today so there could be another spike in volatility as traders try to pin stocks and indexes close to near-term strike prices.
Futures look like this ahead of the open: Dow (-9), S&P 500 (-1); Nasdaq 100 (-2).