Stocks lower, Oil flat

Stock indexes fell apart today, apparently on different worries than oil. The Nasdaq had been stronger than the S&P on the upside, and today was down a bit more than the S&P. Volume on both were slightly less than yesterday on the upmoves. I had been looking for the Nasdaq to move back up into the area of the moving averages (see chart two posts back), and yesterday on the big rally day the close was actually above the cyan (faster) moving average. I was hoping for a bit more of an upmove to get the momentum indicator overbought. Momentum, as defined by the double stochastic, has only been able to retrace back to about the middle of the range. The drop today erased all, and a bit more, of the gain from yesterday. The slight support area on the S&P and Nasdaq doesn’t look like it wants to hold as more price activity is taking place with the implication that prices are accepting the lower values rather than rejecting them. It’s still possible these markets could flip back the other way, as has been common lately. With sentiment as negative as it has become and the technical picture looking so awful, it wouldn’t be a surprise to see a more meaningful upside move than just a one day bounce. But there isn’t much evidence yet from the charts. One possibility beyond the negative sentiment is that the weekly double stochastic is at an oversold level that usually holds further declines. It is still pointing down, but rarely will a market continue much lower from this level without some sort of bounce, or at least a pause, to relieve the oversold condition. 
You can see on the chart above of the weekly S&P etf that the double stochastic usually contains a downswing when it reaches much under the lower reference line. Often the downtrend will resume after the oversold condition is relieved. This is certainly not enough information to trade on, but it could lend support to any signals on the daily charts, and might be a warning to those overstaying a short position.

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