Selling Continues as Bears Strike Again

Both the Nasdaq and the S&P 500 futures were trading up when the opening bell sounded Tuesday.

Action started with the bulls looking good with about an hour before the cash session open, but by the opening bell the bulls started to lose strength. The bears began to set some resistance and bring the market lower. The bears had put on a steady pace into the opening bell.

Traders watching psychological levels

As the session opened, bears rushed in to make their move. The bears did not take long before taking control of the market and sending it downward. There was a brief moment where the bulls tried to reverse course, but the bears held strong.

One big chart level being watched  into today on the S&P 500 futures was the psychological level of 4,000. Both big money on Wall Street as well as smaller traders on the retail side prefer numbers that are round. For example, 3,900 is the next big psychological level that will be in play if this downward trend continues. There will also be smaller psychological levels such as 3,950.

The 4,000 level broke shortly after the market opened. When the level broke there was strong selling pressure that added to inertia already built in during the pre-market action. This pressure was strong enough to create what seemed to be panic selling in the earlier stages of session price action. One indication of panic selling can come from the Volatility Index (VIX). The VIX was steadily increasing and when 4,100 broke there was more selling indicating that the fear had led to the spike of VIX.

Market can’t recover early session losses

After the initial selling pressure ran into exhaustion, the market found a solid base and support and was able to hold those levels. There was a cover pop back toward the psychological level of 4,100, but was not able to sustain action above that level.

This was a good sign for bears to keep control. Looking forward to the coming sessions this 4,100 level on the S&P 500 futures will be a very pivotal and telling level.

The last hour of the day saw increased volatility and price movement. Just like yesterday, there were moves in the micro, but the macro was stagnant. At the end of the session, it was another red day for the market. Today marks the third consecutive day that both the S&P 500 and the Nasdaq closed negative.

As previously mentioned, both the Nasdaq and the S&P 500 futures were negative to close the day. The S&P 500 futures closed down 1.05%, losing 43 points, while the Nasdaq futures closed down .99%, a loss of 123 points. The Dow was down 284 points, losing .89%.