Warning: Major Us Stock Markets Break Trendline Support

via John Murphy

U.S. STOCK INDEXES BREAK SUPPORT LINES … Major U.S. stock indexes are under heavy selling today and are breaking some important support lines. Chart 1 shows the Dow Industrials falling below a trendline extending back to early February. That signals a possible drop back to its February intra-day low and its 200-day moving average. Chart 2 shows the S&P 500 breaking trendline support which puts it back on the defensive as well. Chart 3 show the PowerShares Nasdaq 100 ETF (QQQ) falling below its 50-day average (blue circle). That’s due to continued selling in the technology sector. Social media internet stocks are leading the Nasdaq lower. Some of the biggest tech losers are Chinese stocks which are having a very weak day.

INTERNET STOCKS REMAIN WEAK … Tuesday’s message showed the Dow Jones US Internet Index leading the selling in technology. Chart 4 shows that same index falling toward its 200-day average. Some of its biggest losers are Facebook (FB) and Alphabet (GOOGL). Chart 5 shows GOOGL heading back toward its February/March lows. Chart 6 shows Tencent Holdings LTD (TCTZF) tumbling 10% to the lowest level since early February. Chinese stocks are being sold especially hard today (possibly on expectations for new tariffs being imposed on that country). Chinese stocks are also leading emerging markets sharply lower today.

DROP IN BOND YIELDS HURTS FINANCIALS, BOOSTS UTILITIES… Bonds are bouncing today in a global flight to safety. As a result, bond proxies like staples, utilities, and REITs are the only sectors in the green. All others are losing ground. A drop in bond yields is also weighing on bank shares and financials in general. Chart 7 shows the Financial SPDR (XLF) dropping nearly 2% today and threatening its early March low; while Chart 8 shows the Utilities SPDR (XLU) trading higher. The CBOE Volatility (VIX) Index has also climbed back over the 20 level today which is usually a negative sign for stocks.