After six weeks of advance, stocks finally took a breather but fail sharply lower. Worries about a rate hike in December haunted the markets through out the week after strong job report last Friday. Technology sector and retail sector were dragged down the most by negative earning reports from CISCO and Norstrom. For the week S&P 500 index closed at 2023, down 3.63%, Dow Jones Industrial Average lost 3.71% and Nasdaq composite index fell the most by decreasing 4.26%.
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| Weekly chart of S&P 500 index |
A long red candle showed up this week in the weekly chart of S&P 500 index reflecting the overwhelming negative sentiment in the market. In the past two weeks, I have discussed the test of the support level after S&P 500 index breaking above its 28 moving average. A successful test is needed to keep the momentum going and sustain the up trend. Ideally we would like the pull back to be mild and not as disruptive, but this time the rally on the way up was too fast so the pull back we get is sharp and violent. As the index fell below the support, it is critical to see if it can pick itself up and climb back above its 28 week moving average in the next couple of weeks.
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