Despite earlier gains this morning, it does appear that the DJIA streak of 20 consecutive positive Tuesdays is in jeopardy, as equities have sold off in afternoon trading. With nothing atypical coming out from Fed speakers today, most of the recent slide has been exacerbated by some technical breakdowns.
As of 2:25PM, the S&P 500 is off -1% to 1,625, falling below the all-important 1,635 level that we hovered above earlier today. 1,635 continues to be a key level for traders, as additional selling is clearly being triggered by technical program trading. Overnight, traders observed similar sell orders in the thinly traded futures market, as the S&P fell below this critical threshold.
With the selling pressures mounting, we are also observing an uptick in the volatility index (VIX), currently up nearly +6%.
With today’s losses, we are in the longest correction in terms of days since the mid November lows, currently 9 days old (1,670 to 1,625). This is not too significant in the big picture, but is indicative of how strong the bull market has been. Previous pull-backs include: 7 day correction in December (during the fiscal cliff situation), 4 days in February, and 5 days in April.
9 days in, we are currently about -3% off the highs. A -5% correction (perfectly healthy) would take us to the psychologically/technically important 1,600 level.