Charts of the day

January 20, 2016 01:51 PM

Equites are taking it on the chin again today and appear to be signaling a much more severe downward move. Lets see what the charts are telling us. The S&P 500 has taken out two significant support levels and could challenge another (see chart below).

Earlier this morning the S&Ps breached the 1831, the low from the Aug. 24 rout. Later the market continued to drop breaching 1813, which was the low from the October 2014 correction.

The October 2014 correction set a significant bottom. The market rebounded to set a new all-time high. Technicians may have noted that the weekly low close from that move (week ending Oct. 13, 2014) was breached last Friday, indicating further weakness ahead.

The next major support level could be huge. With the October 2014 low taken out, the next major level is 1732, a yearly low set in February 2014 (see top chart). That level is currently crossing a major trendline from the March 2009 credit crisis low and the October 2011 correction low. Those are two huge technical lows.

Earlier in the sell-off, Jan. 8 to be exact, a trendline drawn from the October 2011 correction low to the August 2015 low was broken. This created significant technical damage a suggesting  a move to the major trendline from March of 2009 (see chart below). 

About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.