Support Broken Tends To Act As Resistance

We have been correctly suspicious of the pattern of lower highs and lower lows below the declining 5 day moving averages for the $SPY $QQQ $XLF and $SMH and that has hopefully saved you some money. The weakness in $SMH was our primary reason for concern for the broader market and after the $QQQ lost support at 56 and the $XLF broke down through 12.80 it became obvious that further weakness would be coming. The SPY has also fallen below the widely watched 50 day moving average at 122.90

We like to observe the Fibonacci retracement levels for potential levels of support, but until markets actually find support on a shorter timeframe, they are simply levels to observe. You can see on the charts below that the $SPY is trying to stabilize at the 50% level, the $QQQ at the 61.8% level, $XLF near the 50% and the $SMH has exceeded the 61.8 and is considered a “failure.”

The one thing that is certain on the intermediate term timeframe is that the pattern of lower highs and lower lows remains intact and until we see that change, equities remain “guilty until proven innocent.”