After two days of destruction, triggered by yet another Fed rate hike and the prospects of yet another potentially catastrophic hurricane, the tone of the market has changed dramatically.  Amazing how fast that happens isn’t it.  Just 48 hours ago the tone of the market was fairly positive and the indices looked healthy.  That was then.  With significant technical damage done and last lines of defense (key support lines) confronted, it doesn’t look good for the bulls.  Granted we’re probably due for a bounce at key support levels here (which I’ll discuss below), but the intensity of the selling is indicating this rally is in big trouble.  It would take a small miracle to bounce quickly from here and hold at these levels.  Stranger things have happened.  We find ourselves in a nearly identical situation as just a couple weeks ago when the market was in danger of heading for the toilet when inexplicably, the market rallied back above support levels despite the worst hurricane in history.  It’s often said that history repeats itself, but I don’t see that happening for a second time.  This market needed an easing of interest rates (or at the very least some discussion that it might happen in the near future) and didn’t get it.  Gold is rallying.  Most consumer related industries are broken, housing is cracking and semis are on their way.  Jeez.. and to think I’m an optimist.

You can see from the chart below that the naz is bearing down on key support around 2100.  I would expect some sort of bounce around this level initially, but if it can’t hold there look for support in the areas of 2075 (200 DMA) and finally 2050.  Although yesterday’s move can’t be considered a day of distribution, the selling was still well above average.  Ugly any way you look at it.

The Dow is also bearing down on its trend line (it actually broke through a bit) as sell volume surges.  If it can’t hold here, there is minor support at 10,200, but Dow 10,000 becomes a very real possibility.

While the S&P also plummeted below the first line of defense of the 50 day moving average, it still has support (just barely) of the intermediate trend line.  Expect a continuation of deterioration this morning below this key support level, but its important that the S&P close the day above this line today.  Note the increasing sell volume as institutions head for the exits.