Stocks are extending yesterday’s selloff as the optimism of the past weeks gives way to more bleak economic news. Cisco’s earnings report was a mjor catalyst, as they forecast a hefty decline in revenues for this quarter. The strength in the US Dollar and move in the Yen/Euro cross, while coming largely from European rate hikes, highlight the mood of deleveraging and risk aversion. In addition, traders are casting a wary eye toward tomorrow’s NFP numbers. with a “whisper number” of a loss of 250K floating around today.
The break of the trendline along recent lows was a technical catalyst for yesterday’s selloff. The break gained steam as it took out the 50 percent retracement level of the past two week’s rally. A held trade under 918 could lead to a test of psychological support at 900, then the next Fibonacci support level at 896.49. The big break of the past two days has pulled momentum ( the bottom panel of the chart) to a buy signal level.
