As expected, the width was also terrible. NYSE advances minus declines were over -2,500 on both days. This is the worst latitude in two days since the beginning of February 18. After this similar event two years ago, the “500” sank a third day before closing higher. The index fell sharply for a third day in August 2015 before recovering well.
The good news is that we saw a few days when investors threw the baby out with the bath water. Basically everything was unloaded. The best performing sector on Tuesday was Consumer Staples. But this group, too, which is supposed to help investors with market weakness, fell by almost 2%. Energy, materials, industry, technology and healthcare all declined by over 3%. Defensive utilities fell 2%, with interest rates at all lows.
The “500” hit the oversold territory with the 14-day RSI at 28. This is the most oversold daily since August 5, 2019. Preliminary put / call data showed a high level of fear, a good technical sign, on Tuesday. The “500” held support near 3,125 (50% retracement), while the nearest range was 3,050. With the steep decline, rallies could be sharp – so stay on your toes.
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