NQ opened and trend down all day on Tuesday, breaking and then closing below 4170 support.
4170 is going to be key inflection price level for NQ on Wednesday.
-- Trading below 4170 is going to be bearish, and could trigger selling algos. If so, the next support is 4100.
-- Remaining above 4170 is likely to trigger short-covering, first resistance is at 4210.
From Bloomberg - Tom Demark:
The Standard & Poor’s 500 Index’s rally will give way to a full-blown retreat should the benchmark gauge lose altitude over the next few days, according to Tom DeMark, the chart analyst who predicted an advance in oil earlier this month.
A momentum formula employed by the DeMark Analytics LLC founder that compares closing prices with levels four days earlier would issue a bearish signal should the advance fizzle this week, he said. Specifically, it would foreshadow a decline should the S&P 500, which ended at 1,945.5 Monday, slip at Tuesday’s open and close below 1,926.82. Those conditions were met today.
The benchmark index slid 0.2 percent at the open and declined 1.3 percent to 1,921.27 at 4 p.m. in New York.
“The foundation of the ongoing rally is suspect,” DeMark, based in Scottsdale, Arizona, said in a phone interview. “The temporary buying produces a price vacuum beneath the market and accelerates the subsequent decline. The decline is going to be sharp.”
A handful of chart-based calls by DeMark have looked prescient in recent weeks, including a prediction on Feb. 11 that oil would rally and a Jan. 20 forecast for a temporary bottom in the S&P 500. In the same interview he made the crude projection, he said the S&P 500 might go as low as 1,797. It bottomed that day at 1,810.10 and closed at 1,829.08.
Now that this S&P 500 trigger has occurred, the benchmark index will decline at least 8.2 percent from Monday’s close to 1,786, a level last seen in February 2014, according to DeMark. Should the market top correspond with what he referred to as “bad news,” the S&P 500 could see deeper selling down to 1,736, an 11 percent decline. DeMark sees the ongoing market rally as temporary relief as investors exit short positions.
“We’ve seen some pretty vicious short-covering come in, which has caused the market to move up,” said DeMark. “When that happens, it really plays havoc with the market once the downside move begins.”
