Dow, S&P 500 extend recent selloff early, but trading choppy

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DOW, S&P 500 EXTEND RECENT SELLOFF EARLY, BUT TRADING CHOPPY (1020 EDT/1420 GMT)

Major U.S. stock indexes are mostly down in choppy early trading on Monday, extending recent losses amid worries over COVID cases in China and possibly an aggressive U.S. interest rate hike schedule.

The Dow and S&P 500 fell more than 1% each after the opening bell, but are last well off those lows.

Most of the major S&P 500 sectors are lower in early trading, with energy down more than 4%, leading declines.

Of note, the Nasdaq Composite hit a low at 12,722, putting it around 1% from its March intraday trough. It has since clawed its way back to slightly above flat.

Wall Street tumbled on Friday, as an increased certainty around aggressive near-term rate rises took its toll on investors. It was the third straight week of losses for both the S&P 500 and the Nasdaq, while the Dow Jones Industrial Average posted its fourth weekly decline in a row.

Here is the morning market snapshot:

(Caroline Valetkevitch)

NASDAQ COMPOSITE: 2022 LOWS AT RISK (0900 EDT/1300 GMT)

In the wake of the market’s back-to-back bruising at the end of last week, U.S. equity index futures are pointing to downside follow-through at Monday’s open.

The Nasdaq Composite ended Friday down more than 20% from its November 2020 record close, and only around 2% from its March low at 12,555.35:

The March intraday low was just slightly below the Feb. 24 intraday low at 12,587.882, and essentially right at the 38.2% Fibonacci retracement of the entire March 2020-November 2021 advance, at 12,552.36. The IXIC’s low close so far has been 12,581.22.

Thus, this appears to be a strong band of support. Additional support can be found at the March 2021 trough at 12,397.

In the event the IXIC tests, or violates its March 2022 lows, traders will be watching to see if the daily RSI, which ended Friday at roughly 30.00, can stabilize ahead of its late-January low at 16.599.

If so, amid elevated volatility, a bullish momentum convergence may then lead to a sudden, powerful upward reversal.

However, if this RSI trough gives way, the pattern may be forced to reset, which may then require a more protracted and deeper IXIC decline, before another positive convergence could then materialize.

The 50% retracement of the IXIC’s March 2020-November 2021 advance is at 11,421.82.

(Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)