The major US indices are closing sharply lower to start the new trading week. Better than expected ISM -non manufacturing index, sent yields moving to the upside, the USD higher and stocks to the downside.
Morgan Stanley's Mike Wilson who called for a "tactical rally" to the 4100-4150 area, bailed on the rally idea today after the index reached a high of $4100.51 last week (Thursday).
In his note to customers on Monday said:
- "As predicted, falling interest rates at the back end have led to modest, further gains for this bear market rally. However, with last week's price action, the S&P 500 is now right into our original tactical target range of 4000-4150."
He added:
- "While the index has modestly exceeded its 200-day moving average and the breadth continues to expand, the downtrend from the beginning of the year remains in place."
He warned that:
- "This makes the risk-reward of playing for more upside quite poor at this point, and we are now sellers again."
Although he does not rule out a final run up to 4150, he looks to the level as the "absolute upside" the index can reach. He looks for a break of 3938, which is where the 150 day MA is found, to give bears downside confirmation.
Looking at the closing levels, the S&P is closing just below the 4000 level at 3998.83
The final numbers are showing:
- Dow industrial average fell -482.80 points or -1.40% at 33947.10
- S&P index fell -72.88 points or -1.79% at 3998.83
- NASDAQ index fell -221.55 points or -1.93% at 11239.95
- Russell 2000 fell -52.61 points or -2.78% at 1840.22