August Lows Get Tested, What Does It Mean?

This afternoon, the SPDR S&P 500 Index ETF (NYSE: SPY) traded as low as $110.16 a share. The August 9, 2011 low was at $110.27 a share. Often stocks will go back and test a level where the stock once traded, therefore, it is not surprising to see that August low get tested today. The declines in the market come as the financial stocks decline sharply lower.

Bank of American Corp (NYSE: BAC), and Citigroup Inc (NYSE: C) are leading the sell offs in the financial stocks by declining lower by 8.0 percent. Traders must remember when the financial stock decline the major stock indexes will likely follow.

The transportation stocks are also plunging lower this afternoon. The iShares Dow Jones Transportation ETF is also declining by 3.19 percent. The airline stocks had to signal mayday several times as AMR Corp (NYSE: AMR) dropped lower by 35.0 percent. Other leading airline stocks that are declining this afternoon are United Continental Holdings Inc (NYSE: UAL), US Airways Group Inc (NYSE: LCC), and Delta Air Lines Inc (NYSE: DAL). Airlines are an important indicator for the stock markets because they represent business and leisure travel around the world. These stocks are plummeting despite the sell off in crude which is a very bearish indication for the airline sector as well as the overall economy.

Traders and investors must remember that there will be some daily chart support around the August 9, 2011 lows, however, this level is not going to be a major support area. It will be a short term support level at best. It is safe to say that this is a traders market at this time. The buy and hold strategy is gone for the time being and is not expected to be back for a while.

Nicholas Santiago InTheMoneyStocks.com