Good day! The S&P 500 tested its 20-day moving average and closed under its 10-day moving average for the first time in over seven weeks on Thursday as the market continued Wednesday's correction. The renewed breakdown into Thursday's opening bell followed a long period of congestion as the market reacted primarily through time versus price to the support levels as discussed in yesterday's column. These hit at approximately 15:00 ET on Wednesday and followed a series of three lower lows intraday which exhausted the trend into price support levels from previous lows, as well as the 10-day moving average in the S&P 500 and Nasdaq-100.
Dow Jones Industrial Average
Interestingly, a lot of the news I read last evening pointed to China's latest gross domestic product reading as the culprit driving prices down. While this certainly affected key stocks with a higher degree of exposure in China, such as Caterpillar (CAT) (-2.02%), DuPont (DD) (-1.55%), and Boeing (BA) (-0.85%), the index futures did not react strongly to the news. China's GDP was stronger-than-expected, which increased speculation on the continuing pace of inflation and rate hikes to curb it.
The real selling on Thursday came after 9:00 a.m. ET. With the 20-day moving averages looming, however, the extent to the retracement was not as strong as the previous day. Three waves of continuation selling took place between 10:00 a.m. ET and 11:30 a.m. ET when that daily support finally hit. Reversals promptly followed.
Corrective moves in the market tend to come in two waves. The first wave on Thursday took place between 11:30 a.m. to nearly 13:00 ET. The market then rested and formed its second wave of upside out of 13:30 ET correction period. This second wave mimicked the first and stalled at equal move resistance and a slew of moving averages and prices resistance from premarket levels when it tested them just over an hour later.