Dow Jones Breakdown Confirmed

As we discussed in yesterday's blog post, the Dow was on the verge of a breakdown.  The massive rising wedge from the lows in March came to a head and we broke down through it.  Yesterday, I also said that I was looking for confirmation of yesterdays break with a follow through day.  WE GOT IT TODAY!.  The Dow closed down 227pt and blasted through the support are of 12700 with a vengeance.  Short term reactions aside, this market looks like it wants to head down to into the 12450 area which represents the 50% retracement level.  This should coincide with about 1350 to 1360 on the S&P 500.  The structure of this market is broken. 


 

The S&P 500 is painting a similar picture, breaking down through its wedge today.  One minor difference is that the S&P has not broken through support at 1384.  We want to see this happen soon on a closing basis.

Finally, the Nasdaq looks to be the strongest of the three indices so far.  It is still trading within its trend channel from the March 2008 lows; however, it has broken through a support line from April lows.  We want to keep a close eye on the 2400 area.  This may coincide with the support areas we mentioned on the Dow and S&P.

The next few sessions should be interesting.