Investors know all about the economic and geopolitical headwinds hurting stocks. Debt problems in Greece spreading to other European countries. Crude oil gushing into the Gulf of Mexico. Korean saber-rattling.
The latest blow came Friday: a fragile U.S. economy unable to create enough private-sector jobs to quell fears of an economic relapse.
The newest obstacle? The negative price action of stocks themselves. The Dow Jones industrials fell 115.48 points Monday, capping a two-session drop of 439 points and closing at 9816.49, a fresh 2010 low. Analysts who measure the market's health by studying the price charts of major stock indexes are starting to warn of serious deterioration. They say if the downdraft is not halted soon, it could lead to a second leg down and an official bear market, or 20%-plus drop.
The Dow is 12.4% below its late April peak, and the Standard & Poor's 500 is down 13.7%.
As is often the case when stocks are falling, Wall Street points to certain price levels that amount to a "last line of defense" for the stock market, says money manager Gary Kaltbaum. In general, if buyers appear and stocks can stay above prior lows deemed important, it's a sign of strength. The flip side: If these levels give way, it's a sign buyers are not willing to step up, and lower prices are likely.
Many — but not all — of the market's support levels have already been violated. Both the Dow and S&P are now below their 200-day trend lines, which historically has meant the market is in, or close to, a downtrend. "It's bearish," Kaltbaum says.
Both indexes have also fallen below their panic-induced intraday lows hit during the May 6 "flash crash," as well as the closing levels hit in the last nasty correction back in early February.
The last line in the sand for stocks is the 1045 level on the S&P 500, its intraday low hit on Feb. 5, many analysts say. "There was a tremendous amount of pessimism back then, stocks were oversold, and the market turned up," says Bruce Bittles, chief investment strategist at R.W. Baird. "If we don't hold those levels, we are looking at a 20% bear market drop." The S&P closed at 1050.47 Monday.
A potential positive: Neither the Dow nor S&P 500 are down more than 15% from their highs. That's good news, as S&P data show that bear markets have occurred 80% of the time since 1946 when a market correction goes beyond 15%.
The latest blow came Friday: a fragile U.S. economy unable to create enough private-sector jobs to quell fears of an economic relapse.
The newest obstacle? The negative price action of stocks themselves. The Dow Jones industrials fell 115.48 points Monday, capping a two-session drop of 439 points and closing at 9816.49, a fresh 2010 low. Analysts who measure the market's health by studying the price charts of major stock indexes are starting to warn of serious deterioration. They say if the downdraft is not halted soon, it could lead to a second leg down and an official bear market, or 20%-plus drop.
The Dow is 12.4% below its late April peak, and the Standard & Poor's 500 is down 13.7%.
As is often the case when stocks are falling, Wall Street points to certain price levels that amount to a "last line of defense" for the stock market, says money manager Gary Kaltbaum. In general, if buyers appear and stocks can stay above prior lows deemed important, it's a sign of strength. The flip side: If these levels give way, it's a sign buyers are not willing to step up, and lower prices are likely.
Many — but not all — of the market's support levels have already been violated. Both the Dow and S&P are now below their 200-day trend lines, which historically has meant the market is in, or close to, a downtrend. "It's bearish," Kaltbaum says.
Both indexes have also fallen below their panic-induced intraday lows hit during the May 6 "flash crash," as well as the closing levels hit in the last nasty correction back in early February.
The last line in the sand for stocks is the 1045 level on the S&P 500, its intraday low hit on Feb. 5, many analysts say. "There was a tremendous amount of pessimism back then, stocks were oversold, and the market turned up," says Bruce Bittles, chief investment strategist at R.W. Baird. "If we don't hold those levels, we are looking at a 20% bear market drop." The S&P closed at 1050.47 Monday.
A potential positive: Neither the Dow nor S&P 500 are down more than 15% from their highs. That's good news, as S&P data show that bear markets have occurred 80% of the time since 1946 when a market correction goes beyond 15%.
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