Markets began the week with big declines with the Nasdaq leading the way falling 3%, the vast majority due to the continuing slumping of the biotech group. What makes many think that there is still room to the downside is the orderly fashion in which the selloff has transpired. Fear does not seem to be rampant, and perhaps many are looking for a capitulation day before dipping their toes back in. Today the index recorded the bearish death cross, and was the last of the major indexes to hold out. The Nasdaq is now 13% off recent all time highs. The S&P 500 is now on its own 5 session losing streak since slicing below a bearish rising wedge pattern. Today was the benchmarks third CLOSE below the round 1900 handle this year and many are awaiting a retest of the 1867 lows made on 8/24. After that expect a test of last Octobers lows of 1820. The Russell 2000 index, which is important because small cap issues normally lead, was unable to hold its late August lows on 8/24. It is now on a 7 day losing streak since a bearish reversal on 9/17. Concerning as well are the leaders which were hit in Mondays onslaught. SKX, a general in the retail space, was hit to the tune of 7.1% and undercutting its 50 day SMA in the process. Below was the chart in the way it was presented in last Tuesday’s Game Plan. The stock has finished the last 4 weeks at or in the lower half of its weekly range, a bearish signal. SKX is now in bear market mode lower by 21% from recent all time highs. The taut trade has become very loose like most everything else and the loss of the 50 day SMA which was supportive all year long now looks like a negative trend change has taken place.
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