Just today, the Dow, S&P 500, and NASDAQ broke below their closing lows for the year. Also, the Shanghai Index broke its previous low formed in July 2010. Such major breaks of technical support are not without significance since the U.S., and an increasing share of foreign, equity markets are now dominated by computer algorithms that are highly reliant upon technicals in making their trading decisions.
It will be very interesting to see if tomorrow or this week will mark the beginning of larger corrections as new lows are registered across the major exchanges.
Before I hit you with the charts, consider Breaking of lows could trigger more selling by Mark Hulbert at MarketWatch:
Prior to today, the stock market over the last six weeks had—on three separate occasions—successfully tested its early August closing low. It failed on its fourth test today.
This is bad news from the point of view of any of a number of technically-oriented timing models. Many of them were poised to trigger additional sell signals if the August lows were broken on a closing basis. So be prepared for additional waves of selling in coming sessions.
The Shanghai Index shown below has been reflecting reduced enthusiasm over the Chinese economy since dropping almost 25% from its recent highs earlier this year. As you can see, the most recent close at 2359.22 was a break below its previous bottom formed in July 2010 at 2363.94 and, in the second chart underneath, shows it has another 30% to go before reaching prior support in late 2008. Let's hope the Chinese economy doesn't turn into a high-speed rail incident.
