Stocks flailed wildly today as investors were pushed every which way by competing headlines. The market rallied strongly after the open before sharply reversing through noon on news that Russian gas giant Gazprom had halted gas flows to Europe due to a supposedly undiscovered gas leak.
“Gas transmission via the Nord Stream has been fully shut down until the operation defects in the equipment are eliminated,” the company said moments before the pipeline was expected to be reopened to Germany. No timeline for the repair was given.
Whether or not the leak actually exists doesn’t matter. What does matter, however, is that stocks plunged lower again today in a wicked intraday selloff that now has the S&P back within striking distance of a breakout below 3900.
We identified yesterday that 3900 was the S&P’s last line of defense preventing the market from testing its June lows. The index looked as though it would snap higher heading into the holiday weekend prior to the Gazprom bombshell.
Now, though, all bullish bets are off. And investors will have plenty of time to think about how bad things could get with the market closed for Labor Day.
In addition, the S&P’s stochastic indicator remains buried. Moves like this for the stochastic indicator can sometimes precede sharp recoveries.
But many times, this kind of behavior only leads to epic meltdowns. The S&P is likely approaching another deep move lower if support fails to hold at 3900.
“To make matters worse, the S&P 500 is trapped in the danger zone – below its three big moving averages,” said eToro analyst Callie Cox.
“Those moving averages served as floors up until a few weeks ago. Now, they seem to be ceilings that the index just can’t bust through. The mood has definitely changed.”
Cox also said that the market probably wouldn’t test the June lows, which is certainly an optimistic (and probably wrong) take on the situation. Plenty of analysts are holding on to the idea that the market is just one good report away from a major rally.
Until the selling stops, however, that’s not going to happen. The market’s short-term trend is still bearish with seemingly no end in sight.
Compared to the general market, Meta Platforms (NYSE: META) has actually done relatively well. Yes, the stock is down since mid-August, but it never took out support at the early August lows (yellow line).
Since taking out the 10-day moving average and yesterday’s low, though, META is throwing off serious correction signals. The stochastic indicator even dipped back out of oversold territory, suggesting that a move past support may soon arrive.
If it does, it might make sense to take META short with a trade trigger of $154.44, below support, as the general market eyes an encounter with a key price level of its own.