It has only been a couple of days, but we can already see some technical damage being created on the charts. In this post, we will be looking at the major US indices. I will be writing about the US sectors later.
First, we will take a look at the S&P 500:
The first thing you will notice is that we are still range bound, and have not made a new high since May 5015. It looks like we were going to try to test those highs again, but the outcome of the vote sent the markets falling. The first support was around 2040, but that has failed to hold. The next price we will look for is 1950, which has never been tested as a support. However, it seems more likely it will fall to a support level in the 1800-1899 range. This is because of the similarities between the three previous crashes: a major event occurred outside of the US, panic, then the realization that the US is fine.
Next we look at the Dow Jones Industrial Average:
The chart looks pretty similar to the S&P 500, however, you will notice there isn't a support level between 17400 and 16400. This helps give credence to an S&P 500 support around 1850. Because the DJIA and S&P 500 follow each other pretty closely, you want to look for common areas on the chart. In this case the common supports are 1825 for the S&P 500, and 15,750 for the DJIA.
Now we look a the NASDAQ Composite:
As with the previous two indexes, you can see the common support is around 4200 for the NASDAQ Composite. It is also the next likely support for the composite, since it has fallen through the 4700 level.
Lastly, we look at the small cap stocks in the Russell 2000:
This index takes a life of its own, so we cannot really compare it to the other three indices. However, we can see that it has tried to leave the 1080 - 1210 range that it was in, in 2014. It fell out of the range at the beginning of the year, but fought back in. Now, we are testing that support once again, so we will soon see where the index goes from here.
To conclude, the Brexit caused a lot of damage to the charts. I believe that we were on the brink of starting a new bull, but it would have required the UK to remain in the EU. Now that we know they are leaving, the uncertainty the future holds is enough to scare investors away from stocks, and force the markets back down. Now the only catalyst that can bring us to a new bull is this quarter's earnings, but those do not seem to be good either.
