UPDATE: S&P 500 closes at a fresh 2010 closing low, finishing down 33.3, or 3.1%, at 1041.24. The index dropped as far as 1035.18 before bouncing up and trading around the 1040 level into the close. According to S&P’s Howard Silverblatt, today’s decline is the second 3% decline this month, with the other coming on June 4, and the fifth over the past year. S&P 500 is now off 14.5% from its recent high.
“So the question is if new money doesn’t come in for bargains should we set a place for the Bear at the Fourth of July barbecue?” Silverblatt quips.
ORIGINAL: US stocks getting shellacked today amid a disappointing consumer confidence report and mounting worries over a global economic slowdown.
But investors remain fixated on 1040 for the S&P 500. (And as I write this, the index has fallen through that level and traded as low as 1037.30). 1040 represents the S&P 500′s closing low and a key support level. Crashing through that level has several ramifications, which Dow Jones columnist Tomi Kilgore highlights in a recent snippet on the wire:
The S&P 500′s dip below 1040-1042 support, defined by the lows seen in May and earlier this month, is technically very significant in more ways than one. S&P 500 was down 37 points at 1038. First, it extends a pattern of lower lows and lower highs in place since April, a defining characteristic of a downtrend. It also confirms a long-term head-and-shoulders reversal pattern, which suggests the downtrend has a lot more room to run. The first key support area is the June 2009 highs around 945-955. Next is 860-880, which encompasses the July 2009 lows and the 61.8% retracement of the March 2009 to April 2010 bull market.
If that isn’t enough evidence of the significance of 1040, check recent comments from Minyanville’s CEO Todd Harrison.
“Don’t think for a second the folks on the Beltway aren’t acutely aware of the importance of S&P 1040,” he says. “You can agree or disagree with the tactics of the invisible hand but if nothing else, they’ve earned the respect of Boo’s Bandits,” he adds, referring to short sellers.
“Once upon a time, the short side was a natural and necessary balance in the process of free-market capitalism,” Harrison notes. “Now? Much like ‘big business,’ they’re considered pure evil by the majority of the mainstream population.”
There’s a lot of red on our screens, with all of the major indexes in negative territory and sitting near session lows. And half of the 10 S&P 500 sectors have broken below their prior correction closing lows, according to Bespoke Investment Group.
Consumer discretionary and staples hit new lows yesterday, while technology, industrials and energy all registered fresh lows today amid the broad market selloff. “Consumer discretionary continues to be the weakest sector during this current downturn,” firm says. “Any positive technicals that were in place for it are now long gone.”
Keep an eye on the last half hour of trading. If the S&P 500 closes significantly lower than 1040, tomorrow could get real ugly.
(John Shipman contributed to this post.)