Bull market stalls out in weekly resistance zone

Market Snapshot for October 17, 2011 (8:45 p.m. ET):

  • Closing Prices: DOW 11,397.00 (-247.49, -2.13%), S&P 500 1,200.86 (-23.73, -1.94%), NASDAQ 2,614.92 (-52.93, -1.98%), Nikkei 225 8,752.86 (-126.74, -1,43), DAX 5,859.43 (-107.77, -1.81%), FTSE 5,436.70 (-29.66, -0.54%)
  • OIL 86.33, GOLD 1,674.30, SILVER 31.86
  • EURO 1.3769, YEN 76.80, BRITISH POUND 1.5777, U.S. DOLLAR INDEX 77.345

Daily and Monthly Resistance Levels Put a Stop to Recovery Efforts

The market experienced its strongest day of selling on Monday since hitting new yearly lows on October 4th. The session was ripe for profit-taking with the market up 6% in the last week alone and both the S&P 500 ($SPX) and Dow Jones Ind. Average ($DJI) striking 100 day and 20 week moving average resistance levels. The stronger Nasdaq has also been flirting with larger-scale resistance at the year's highs. The reversal we were looking for off this resistance level heading into early Monday morning finally kicked off shortly after 5:00 a.m. ET after the pace of the buying in the index futures slowed to form a 5 minute Momentum Reversal between 2:30 and 5:15 a.m. ET.

The premarket selling gained strength immediately out of the Momentum Reversal pattern and the futures only paused briefly around 6:00 a.m. ET at earlier premarket lows before continuing to sell off sharply ahead of the opening bell. The move rapidly eroded Sunday evening's gains, as well as those from Friday after the 16:00 ET closing bell, and left the market in negative territory before Monday morning's opening bell even rang. Although somewhat more erratic, the premarket downtrend continued throughout Monday's session and past the closing bell. It was the most decisive downtrend day we've seen since September 30th with momentum that even outpaced that day's trend move.

Dow Jones Industrial Average (Figure 1)

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