Technical Analysis: Dow, S&P Could Head Lower

The Dow and S&P (first two charts below) formed the bearish “three black crows today,” which the SOX, the semiconductor index (third chart below), formed two days ago. A bounce often follows the pattern, and stochastics are certainly low enough for a bounce, but upside could be capped around the middle of the pattern, at roughly 8550 on the Dow and 890-900 on the S&P. 8450 and 885 are first resistance levels. To the downside, 8250 and 875 are critical support. The three black crows suggest downside potential to 8100 on the Dow and 860 on the S&P, which would be enough to break the necklines of potential head and shoulders tops in both indexes, setting up the potential for much more downside. The Nasdaq (fourth chart) faces resistance at 1387 and 1391-1397, and has support at 1347-1357 and critical support at 1330. The equity-only put-call ratio still isn’t providing much support here, closing at .62 today, nowhere near the .80 level that signals the start of healthy fear.

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