Wednesday, February 10, 2016



U.S. stocks retreat, led by the energy sector, as oil tumbles again.

Bank stocks crumble and tech rally loses steam.

U.S. stocks retreated into negative territory Tuesday afternoon, as oil prices tumbled again on a cut to the government's price forecast.

All three main benchmarks opened in negative territory, turned positive and later released their gains as oil prices skidded again, after dipping in and out of positive territory in the morning. The energy sector was the S&P's worst performer, down 3%, followed by telecommunications and financials. Energy giant Chevron Corp. was leading the Dow industrials decliners.

Bank stocks got pounded both in the U.S. and in Europe amid worries about the impact of record-low interest rates and deteriorating credit conditions on banks' balance sheets. Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. were among the Dow industrials leading decliners.

The tech-heavy Nasdaq, lost steam as the day wore on. The tech selloff over the past two sessions had battered the so-called FANG stocks: Facebook, Amazon, Netflix and Google parent Alphabet.

Inventories at U.S. wholesalers fell in December for the third straight month, another sign companies cut back on restocking toward the end of 2015 amid softer sales.

Bank shares fell in Europe amid a broad drop in European stock markets.

Broadly speaking, the U.S. markets' backdrop remains firmly bearish. We are at price levels now where any move much lower will trigger much heavier selling.

The 2016 breakdown has been technically aggressive, while the rally attempts have been comparably lackluster, and largely central-bank driven.

Technically speaking, the U.S. markets' already-bearish backdrop continues to deteriorate.

The S&P 500's technical bias points firmly lower.

The S&P closed Monday at 1,853, marking a 21-month closing low, and positioning it precariously under support.

As illustrated below, the S&P has ventured under major support, notching its worst close since April 2015. 

Significant resistance rests at its breakdown point, spanning from 1,867 to 1,872, and the initial retest should be a useful bull-bear gauge.

Major support spans from 1,867 to 1,886, matching the August low, and the neckline of the S&P's head-and-shoulders top. On further weakness, a near-term target rests at its reaction lows, spanning from 1,812 to 1,820. And much more broadly, a longer-term projected target holds around S&P 1,640.

For the Dow Jones Industrial Average significant support holds around 15,980, an area that's been persistently under siege. On further weakness, a potential floor matches the January closing low of 15,766, and is followed by the 2015 closing low of 15,666.

The Nasdaq Composite has staged a two-session, 5% plunge. The Nasdaq Composite's near-term backdrop remains very weak. The index has plunged 226 points, or 5%, on a closing basis across just the past two sessions. In the process, it's reached less-charted territory, better illustrated below.

The Nasdaq has now fallen off a cliff, plunging to 15-months lows. More broadly, the massive January downdraft, and flat rally attempt, and the subsequent two-session 5% plunge support a distinctly bearish longer-term view.

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