WALL STREET : DJIA Surrenders 140 Points

VIX Soars as Street Sweats S&P Revision

Stocks started the session on a sour note today, after Standard & Poor's cut its long-term outlook on the U.S. to "negative" from "stable." The revision sparked fears that Uncle Sam could soon surrender his coveted "AAA" rating, and added to the already-bearish momentum stemming from renewed fears about Europe's fiscal health. What's more, the adjusted outlook overshadowed pre-market optimism on the earnings front, and sent crude oil futures reeling on expectations for ebbing demand. Likewise, the broad-market butterflies sparked a run on "safe-haven" assets like gold, and fueled the CBOE Market Volatility Index (VIX) to a finish north of its 10-day moving average for just the second time in a month. By the time the closing bell mercifully sounded, the Dow Jones Industrial Average (DJIA) swallowed a triple-digit loss, while the S&P 500 Index (SPX) ended with a loss of 1.1%.

After falling more than 200 points around midday, the Dow Jones Industrial Average (DJIA – 12,201.59) chipped away at its deficit in afternoon trading, but still ended with a hefty loss of 140.2 points, or 1.1%. In fact, Boeing (BA) was the lone blue chip to buck the trend, thanks to a bullish Barron's write-up, while Bank of America (BAC) and Caterpillar (CAT) led the bearish majority with losses of 3.1% apiece. What's more, thanks to today's triple-digit pullback, the Dow ended the session on the south side of both its 10-day and 20-day moving averages for the first time since March 18, but held on to its recent perch atop the 12,200 marker.

Meanwhile, the S&P 500 Index (SPX – 1,305.14) also narrowed its intraday deficit by the close, but still ended 14.5 points, or 1.1%, below breakeven. The broad-market barometer is now in danger of forfeiting its foothold atop its 10-week moving average for just the third time since late August, but appears to have found a layer of support in the form of its ascending 20-week trendline. Finally, the Nasdaq Composite (COMP – 2,735.38) gave up 29.3 points, or 1.1%, by the close, ending beneath its own 10-day and 20-day moving averages for the first time in a month.

TECHNICAL ANALYSIS : Dow Jones Industrial Average

The Dow closed sharply lower on Monday as it extends this month's decline. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. 

Closes below last Thursday's low crossing at 12,163 are needed to confirm that a short-term top has been posted. Closes above the 10-day moving average crossing at 12,334 would confirm that a short-term low has been posted.

If the Dow renews the rally off March's low, weekly resistance crossing at 12,767 is the next upside target. First resistance is the 10-day moving average crossing at 12,334. Second resistance is this month's high crossing at 12,450. First support is today's low crossing at 12,093. Second support is the reaction low crossing at 11,972.

HAPPY TRADING