Here Is Why A Stock Market Sell-Off May Only Be Starting

US Markets

  • S&P 500 -13 points
  • US 10-Year – 2.64%
  • Oil $55.68 -$0.98
  • VIX 17.36
  • Dollar Index 97.47

International Markets

  • China Shanghai -4.4%
  • Hong Kong Shanghai -1.91%
  • Japan Nikkei -2.01%
  • South Korea KOSPI -1.3%
  • Australia ASX – 0.96%
  • German DAX -0.67%
  • UK FTSE -0.97%

Key Events

International Trading

China

The big news overnight is that Chinese exports fell 20% versus a year ago for February. That lead to a steep drop in the Shanghai Composite overnight. So while a 4.4% drop is steep, we should also remember this is China, and it is a volatile market.  The pullback isn’t all that surprising, as we noted the other day how the index was looking overbought and was due for a pullback.

It would seem possible that there is still some more downside to this index to at least 2,920 and perhaps as much as 2,825.

shanghai

South Korea

South Korea continues to look very weak, and we have talked about how this index has me greatly concerned. It has now fallen to a critical support level at 2,136, that absolutely must hold for a variety of reasons.  The first being the peak in the middle of the double bottom. Secondly, the RSI which had appeared to have broken out is now on the verge of breaking down.

korea

While neither of these two indexes is in danger falling to their December lows, they would at the very least suggest there is more downside risk at this point to equity prices than upside potential over the short-term.

S&P 500 (SPY)

With that, we turn our attention to the S&P 500, which is sitting just above a massive level of support at 2,735. A drop below that level quickly sends the index back to roughly 2715.

S&P 500, spx

Russell 2000

Although it doesn’t sound great to hear this, there is the genuine chance the Russell could fall back to around 1456, from its current 1523, about a 50% retracement from the December low to the recent highs. For all of you that believe in Fibonacci and the golden ratio, the Russell would need to see a retracement of 61.8% before turning higher, which happens to confidence with support at roughly 1,396.

Russell

IQ

Anyway, I think someone, somewhere, on social media, said there was no way IQ could fall back to around $24 this week. Well, while it may not hit $24, it indeed is running lower to $25 and butting up against that trend line I had noted when I picked that $24. 😛

IQ

JDWealth Strength IndexAAPL is Extremely Up and trending Up

JDWealth Strength IndexAAPL is Extremely Up and trending Up will be weak today too, as it should. As I have said, I continue to believe this one will be heading back to $26 over the next few days.

jd

Netflix (NFLXWealth Strength IndexAAPL is Extremely Up and trending Up)

Netflix is also looking weak again, and I continue to see that one pulling back to $337.

netflix

Facebook (FBWealth Strength IndexAAPL is Extremely Up and trending Up)

People enjoy taunting me, and I don’t mind, everyone can have their opinion. I continue to believe that Facebook is going to $148.

facebook, fb

Amazon (AMZNWealth Strength IndexAAPL is Extremely Up and trending Up)

I thought Amazon might reach $1,770; it got about halfway there to $1700. But that downtrend is just too hard to rise above. Now the stock is fighting for survival at $1620, but the markets are too strong, and the weight of the market will drag Amazon down also. Now, $1520 is once again a reality.

Amazon, amzn

Nvidia

Nvidia continues to look weaker and weaker, and a move to $139 is coming.

nvidia, nvda

Roku

I can’t believe Roku is back to $71. That is crazy! The stock is way overbought and is likely on its way much lower. $64 is the first stop.

roku

It is Friday, and I should be cheery. But I woke up on the wrong side of the bed, clearly.

Let us just remember that any pullback we see in the coming days is likely to be short-term. They are normal and healthy. At this point, there is nothing to suggest a retest of the December lows are an option. But that doesn’t mean it won’t be a bumpy ride.

-Mike

This article first appeared on Mott Capital.