Global Stocks Break Key Technical Level as S&P 500 Holds On

(Bloomberg) -- Stocks around the world are falling through technical support levels closely watched by investors.

The MSCI All-Country World Index closed below its 200-day moving average on Wednesday for the first time since early June. It was joined by the Dow Jones Industrial Average. A break below the support level is seen by some traders as a bearish signal for stocks.

“For the Dow itself, this violation of its 200-day average comes barely a month after it was trading at a new high,” said Sundial Capital Research Inc. founder Jason Goepfert in a note. “That’s a quick turnaround for the venerable index, and of course raises the prospects that the latest push to its highs was a false breakout, with the 200-day violation indicating likely weakness ahead.”

Read: Equity Traders Seeking Bottom See Long Way Down to Key Support

The Dow’s drop means that two of the so-called Big Four U.S. benchmarks are now below their key averages, with the Russell 2000 Index of small stocks having done so earlier this month. While the S&P 500 Index is about 6% off its record high from July, it remains above its 200-day support around the 2,796 level.

“The S&P is not broken, but clearly it’s not ‘strong’ either having swung more than 1% intraday in each of the past 8 sessions,” Evercore ISI technical analyst Rich Ross wrote Wednesday. “I thought this period of outsized volatility would resolve itself higher, but my confidence in that view has waned as we test support at 2,850.”

Still, Fundstrat Global Advisors LLC Director of Technical Strategy Robert Sluymer said that given the breadth of the weakness Wednesday, it wouldn’t be surprising to see a bounce back on Thursday. He’s closely watching levels including around 2,943, this week’s high, to confirm a low is completing.

To contact the reporter on this story: Joanna Ossinger in Singapore at jossinger@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Andreea Papuc, Cormac Mullen

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