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US stocks heading for biggest weekly drop on record

Jason Sen

The E-mini S&P 500 has collapsed again this week after failing to hold on to 200-day moving average support at 2770/65. The index dropped another 100 points to the next target of 2678/75. If we close the week where we are trading now (2675) we’ll be looking at the largest weekly point drop for the index on record.

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An important level on the longer-term charts is 2678/75. Therefore holding below here is negative for today, targeting 2660/59 and 2653/52. We then meet quite important eight-month trendline support at 2647/43.

There is a good chance of a low for the day here. Long positions need stops below 2637. Further losses test strong three-year trendline support at 2625/23. Long positions here would need stops below 2614. Further losses risk a re-test of the May low at 2593/91 with 100-week moving average support at 2580/75.

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After a near-300-point drop I am looking for reasons to buy in the longer-term bull trend. Bulls must hold the index above the important 2678/75 level if they are to build a recovery, initially targeting resistance at 2691/93. A move above 2700 allows a recovery to 2711/13, then strong resistance at 2719/21 today. If we break higher look for 2732/34.

Focus on the Dow

The E-mini Dow Jones bottomed just 11 ticks above the lower target of 24500/490. The outlook is negative and further losses target 24445 and 24320/300, with important support from here down to 24200.

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This is the best chance of a low for the correction. We are in a longer-term bull trend and this will eventually resume. Try long positions with stops below 24000. A break and weekly close below 24000 would be an important sell signal and risk another 1000-point drop.

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Gains are likely to be limited today but a move above 24750/800 targets 24900 and resistance at 25100/150. Short positions need stops above 25200 for a further recovery to 25320/330, then resistance at 25450/500. Shorts here need stops above 25560.

Jason Sen

Technical Analyst & Trader

For more information and trading education visit InterTrader

The content of this article is the personal opinion of the author and not InterTrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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