U.S. stocks fell sharply Thursday but managed to hold at a key technical indicator for the S&P 500. Traders will be watching to see if the index and exchange traded funds that track it can survive a second test of their 200-day moving average.
SPDR S&P 500 ETF (NYSEArca: SPY) was down more than 1% in afternoon trading Thursday, one day after the Federal Reserve scaled back its economic outlook. Pfizer (NYSE: PFE), Red Hat (NYSE: RHT) and Bristol-Myers (NYSE: BMY) were among the few S&P 500 components bucking Thursday’s downtrend.
Energy ETFs led the way down in sectors as crude futures sold off by about 5% after the International Energy Agency said it would release stocks from its strategic petroleum reserve. [Energy ETFs Hit Oil Slick]
“The big question is how many people are long stocks because they played the 200-day moving average bounce?” wrote Peter Tchir at TF Market Advisors at SeekingAlpha.com.
“It seems like a lot of people had stopped buying the dip during the relentless march down for stocks, but everyone seemed to jump on the bandwagon that the 200 DMA was a big support for stocks,” he said. “I think a lot of investors got sucked in and allocated capital and are now weak longs.”