The stock market today dived at the open and sold off through the session, as China fired the latest shot in the ongoing trade war by slashing the value of its currency, the yuan. The Dow Jones Industrial Average headed toward a test of long-term support.
XThe Nasdaq cratered 3.5%, the S&P 500 plunged 3% and the Dow Jones Industrial Average crashed 2.9%. Small caps tracked by the Russell 2000 sold off 2.8%. Preliminary data showed higher volume on the NYSE and Nasdaq vs. Friday.
Stocks tumbled early as China let the yuan fall to its lowest level against the dollar in more than 10 years and reportedly suspended purchases of U.S. agricultural goods. That followed President Trump's latest round of China tariffs announced last week.
As a result, the Dow Jones index gave up its 50-day moving average and headed straight toward a test of its 200-day line. The Nasdaq gapped down below its 50-day and held slightly above its 200-day line, as did the S&P 500.
All 30 Dow Jones stocks finished lower. Visa (V), Apple (AAPL) and IBM (IBM) tumbled about 5% each in heavy volume. Visa opened below its 50-day moving average and fell further for its first close below the line in two months. A big break of the 50-day moving average (or the 10-week line on a weekly chart) in heavy trade warrants the execution of a best sell rule.
Apple also dropped below its 50-day line. That triggered a 7% to 8% loss-cutting sell signal from a 215.41 buy point of a cup with handle.
IBM is now testing its 50-day line. The stock, at 4% below a 145.49 buy point, didn't trigger the 7%-8% rule. But the heavy volume drop still raises a red flag.
Big Techs Weigh On Stock Market
Microsoft (MSFT) gapped down below its 50-day line in volume 74% higher than normal. Shares remain just above a 131.47 proper buy point cleared in June. But given the break of support, investors might consider locking in some gains.
Tech stock ETFs led sector losers. VanEck Vectors Semiconductor (SMH) tumbled 4.3% and Technology Select Sector SPDR (XLK) shed 4.2%. SPDR S&P Oil & Gas Exploration & Production (XOP) also fell more than 4%.
Energy, chips and software stocks were among the biggest industry group losers in the stock market today. Only gold miners avoided the sell-off to rally more than 4%.
Likewise, Kirkland Lake Gold (KL) was the sole winner in the IBD 50. Shares soared nearly 6% to a new high in above-average volume. The gold miner's stock is extended from last week's strong rebound off the 10-week line. VanEck Vectors Junior Gold Miners (GDXJ) and VanEck Vectors Gold Miners (GDX) rose 4% and 3%, respectively.
But leading software names got hit hard. Paycom Software (PAYC) gapped down and sank 6.5%, closing below its 50-day line for the first time since January. The IBD 50 stock, though, remains slightly above a 215.75 buy point of a four-weeks-tight pattern.
Among other software stocks, Atlassian (TEAM) skidded 6% to test its 50-day line. RealPage (RP) dropped 6% to breach its 200-day line, while Epam Systems (EPAM), Adobe (ADBE) and Veeva Systems (VEEV) lost about 6% apiece.
The Innovator IBD 50 ETF (FFTY) gapped down and at one point fell more than 4.7%.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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