The DJIA lost 315.51 points to close at 17,280.83, down 1.79%. The S&P 500 lost 33 points to finish at 2,002.33, down 1.62%. The Nasdaq was lower by 54.56 points at 4,653.60, down 1.2% and the Russell 2000 lost 14.51 points to finish at 1,152.44, down 1.24%.
The S&P 500 Trust Series ETF (SPY) volume was huge on Friday, trading over 201 million shares. This was one of the largest volume days in 2014. For the week ended Friday, December 12, the DJIA was down 3.78%, the S&P was down 3.52%, the Nasdaq was down 2.66% and the Russell 2000 lost 2.54%.
Technical indicators, such as the prevailing negative divergences, suggest stock prices cannot continue to rise in value for an extended period of time without a selloff occurring. Stock indexes and individual stocks need to reset themselves lower before they can have another move higher.
For the week, the stock indexes are no longer in overbought territory. However, the stock indexes appear to need more downside based on the weekly indicators. It may take a few weeks of lower prices before a weekly oversold signal is given.
Thus, sometime next week the stock market should see a nice bounce to the upside. The strength of that bounce will go a long way in determining the extent of the bounce.
However, it seems the stock market has now entered a bearish phase in the intermediate term. Traders and investors should now use caution as we move forward. The selloff this week should not be taken lightly. There was some damage under the surface of the market. It will take some work to repair that damage.
There are many large-cap stocks that are extremely oversold at the present time. Stocks such as Coca-Cola (KO) , MGM Resorts (MGM) and Tesla Motors (TSLA) are ready for purchase on Monday based on my internal signals.