Many would attribute the current round of equity market sell-off to the sharp rise in the price of crude oil and the big mess in the Middle East. But, the signs of a fresh sell-off has been there for the past 1 or 2 weeks and most technical analysts had been expecting the market to re-test its June low. Now, we know that this "test of the low" has claimed its first "casualty" i.e. Nasdaq. Nasdaq closed at a new recent low of 2054.11 on last Thursday (July 13). Yesterday, it dropped a further 16.76 points to 2037.35 (see Chart 1). Not only has Nasdaq failed its test of the low, it has also broken its then-prevailing uptrend line at the 2100 levels.
Chart 1: Nasdaq's daily chart as at July 14
The other 2 main indices in the US i.e. Dow Jones Industrial Average ("DJIA") & S&P500 are poised to do their respective test of the low (10650 for DJIA & 1220 for S&P500) as well as to test their uptrend line supports (10400 for DJIA & 1220 for the S&P500). On Friday (July 14), the DJIA and the S&P500 closed at 10739.35 & 1236.20, respectively. The outcome of these tests would signal the direction of the US equity markets as well as many global markets (see Chart 2 & 3 below).
Chart 2: DJIA's daily chart as at July 14
Chart 3: S&P500's daily chart as at July 14
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