The Day Of The Death Cross - Markets This Morning

  • Biotechs and commodities led the markets lower on Monday
  • Bad China data on profits started the move down, which accelerated during the day
  • Technical support is still another 20 points down on the S&P

Another down day on Wall Street created the dreaded “Death Cross” in the major averages. It means the short-term move of the market, represented by the 50-day moving average, crossed below the longer-term average.

When the short term average falls below the long term average, it means big, big trouble ahead. It happened when the 2000 dot-com bubble burst. It also happened during the 2008 market crash. The bears spouting this theory don’t want to talk about 2011 – it happened then, too and was a buying opportunity.

Bad China data, lower profits seeming to confirm their recent stock moves, started the way down but prices fell steadily with little respite, except around 11 AM when bears caught their breath, and at 3:30 when bargain hunters came in. For the day the Dow Jones Industrial Average (INDEX:INDU) was down 312.78, or 1.92%, to finish at 16,002. The S&P 500 (INDEX:SPAL) 500 was down 49.57, 2.57%, to finish at 1,882. The Nasdaq Composite (INDEX:COMPX) was down 142.53, about 3.04%, to finish at 4,544.

Biotech the Focus

Presidential candidate Hillary Clinton was being given the blame for yesterday’s action, at least by some traders. iShares NASDAQ Biotech Index (NASDAQ:IBB), the biotech ETF, is down 15% since her tweet promised action on price gouging.

The ETF was down another 6% yesterday, and while some traders are expecting a new bull run the mood in general remained dour. Anthera Pharma (NASDAQ:ANTH), which is working on a drug for lupus, was down 16%. Xencor (NASDAQ:XNCR), which is working with monoclonal antibodies, was also down 16%. Neurocrine Biosciences (NASDAQ:NBIX) was down over 13%. Among the bigger names Valeant Pharmaceuticals (NYSE:VRX)  lost 16.53%, 32.97 per share, to finish at $166.33.

Glencore, Cross of Death

Commodities also took another big hit. Glencore International (OTC:GLNCY) , lost another 24% in London trading and is now down 75% for the year. $13 billion just this month, bringing its market cap down to $10.6 billion. Investors now feel that debt problems and lack of cash flow due to depressed prices may make their shares worthless.
GLNCY stock chart

Source: Glencor Stock Price Data by

With Volkswagen (OTC:VLKAY) continuing to falter – it was down another 6.5% yesterday – European markets delivered a terrible set-up. England’s FTSE was down 2.46%, the German DAX was down 2.12%, and the French CAC-40 was down 2.76%. This offset a pretty good opening in China, with both the Hang Seng and Shanghai indices slightly higher, but Europe had been considered the positive counterweight to China’s problems.

Most commodities continued to crash. Gold was down, silver was down, copper was down, and so was oil. West Texas Intermediate finished down 2.8% to $44.43 per barrel, and Brent dropped $1.26, 2.6%, to $47.34.

Bad Day on Tech Street

With commodity traders and biotech traders losing so heavily, it was inevitable that tech would get hit, and it did. Amazon (NASDAQ:AMZN) finished down another 20.19, or 3.85%, to finish at $504.06, a level it hasn’t seen since September 4. Apple (NASDAQ:AAPL) lost 2.27, or 1.98%, to finish at $112.44. Netflix (NASDAQ:NFLX) dropped 2.77, or 2.71%, to finish at $99.47.

So What Happens Now

For a change it’s a U.S. technical indicator a lot of people will look at. The number is 1,867, the August low for the S&P 500. If averages touch it and bounce higher, the down move could be over. Another plunge and we have another leg down.

For a quick roundup of key news and events before the bell, check the daily news section - Markets This Morning.

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  • I do not have any business relationship with the companies mentioned in this post.
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