AT40 = 12.5% of stocks are trading above their respective 40-day moving averages (DMAs) (day 1 of the second oversold period in 4 days)
AT200 = 39.2% of stocks are trading above their respective 200DMAs (near 2-year low)
VIX = 33.5 (range from 24.4 to 36.2)
Short-term Trading Call: cautiously bullish (with oh so many caveats)

Commentary
As I feared, sellers followed through on the failure of the major indices at their respective 50-day moving averages (DMAs). The S&P 500 (SPY) plunged 3.8% and set a new 3-month low, the Nasdaq lost 3.9% with a 2-month low, and the PowerShares QQQ ETF (QQQ) also hit a 2-month low with a 4.2% loss. I braced myself for a retest of the lows set just on Monday. However, I thought buyers would give up more of a fight to hold there. Instead, all these indices slid right past even the intraday low on Tuesday. This is bearish trading action. The iShares Russell 2000 ETF (IWM) is already testing 200DMA support for the second time this week.

 

The S&P 500 (SPY) confirmed its 50DMA breakdown and stretched well below its lower-Bollinger Band (BB) again. Suddenly, the uptrending 200DMA is close at hand.

 

The Nasdaq still has a ways to go to test 200DMA support, but it also confirmed resistance at its 50DMA.

 

Ditto for PowerShares QQQ ETF (QQQ)…

 

The iShares Russell 2000 ETF (IWM) is perilously close to a major bearish breakdown below its 200DMA.

The selling drove my favorite technical indicator back into oversold territory. AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, closed at 12.5%. This was the lowest close since the early 2016 sell-off that generated the last oversold period prior to this week. AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, closed at 39.2%, a near 2-year low. Sellers are making a statement.

 

AT40 (T2108) plunged below the oversold threshold for the second time this week.

While the indices dropped to their lows of the current cycle of angst, the volatility index, the VIX, stopped short of the closing high from the week. The 20.7% surge to close at 33.5 was still impressive. The iPath S&P 500 VIX ST Futures ETN (VXX) gained 23.7%. ProShares Ultra VIX Short-Term Futures (UVXY) gained 49.8%.

 

The volatility index, the VIX, remains resilient as it appears to pivot around the 2012 intraday high.

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