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Looking For Signals, They’re All Over the Charts

Monday was a rough day for the market with the S&P 500 closing at its lows for the year. Can the bulls circle the wagons and make a stand?

It doesn’t look good.

Oppenheimer’s Carter Worth has spotted a worrisome signal – a former level of resistance just gave way. Specifically, he tells us that the August 9th low of 1120 that had generated a floor for the past 2 months just failed.

Of course, stocks can bounce but Worth thinks the technicals may generate a serious headwind.

He says the S&P small cap index and the S&P mid cap index which had also held their August 9th lows, have broken as well.

If the S&P 500 breaks in the same direction in magnitude as the small and mid indexes, “it would take us to 1065.”

Unfortunately, Katie Stockton, chief market technician at MKM says much the same.

”September was important,” she tells us in a live interview. “

She's watching another technical signal - something called the MACD Indicator. Although it involves somewhat complex technical analysis, the take away is that it has flashed its first sell signal since Dec 2007.

The last time it happened the signal was very prescient. “The December 2007 signal was a precursor to a decline of more than 30% in the S&P,” she tells us. This time she thinks it could be a sign that the S&P slides by another 150 points.

How will you know if the market is about to break in a big way?

Watch 1100, that same level that’s held all summer. “If the market breaks below that level on consecutive weekly closes, then we’re setting up for a prolonged fall,” Stockton says. “Then we’re setting up for 935.”

For what it’s worth all of the Fast Money traders also expect the market to trade lower. “I think we’re heading to 1020,” adds Guy Adami.



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Trader disclosure: On Oct 3, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Seymour owns (BAC); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Terranova is long LQD; Terranova is long MUB; Terranova is long VRTS; Terranova is long OXY; Terranova is long HOS; Terranova is long OIH; Terranova is long AXP; Terranova is long EMC; Terranova is long WFC; Terranova is long AAPL; Terranova is long IBM;
Finerman’s firm is short AAPL calls; Finerman owns AAPL; Finerman owns BAC; Finerman owns GOOG; Finerman’s firm owns JPM leaps; Finerman owns JPM; Finerman owns IWM; Finerman owns MDY; Finerman owns SPY

For Joe Terranova|
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
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Robert Mcadoo
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