TECHNICAL DAMAGE DONE
By Harry Boxer, The Technical Trader
It was a very ugly day. The market started off with a gap down, never looked back, and continued making lower lows all day until finally in the last half hour or so it rallied a bit, probably due to short-covering and some bargain hunting. But at the low ebb of the market the Nasdaq 100 was less than 15 points from its low for the year, and the S&P 500 was only about 5 points off its low of last week, which was lowest point it’s been since mid-February.
So the overall pattern that we’d seen in the prior few weeks that looked very constructive as late as Friday deteriorated at the opening this morning by the gap-down. Investors took the downgrades and the negative news in the telecom sector very seriously and sold most tech stocks off all day and we got very little of a rally whatsoever today.
It was an very poor day technically as well and a review of the technicals showed 1200 stocks up and about 2000 down on New York. The up/down volume there was about 3 ½-1 negative. On Nasdaq it was 2-1 negative on advance-declines and about 7-1 negative on up/down volume. Total volume was about average with nearly 1.6 billion traded on Nasdaq and about 1.2 billion on New York.
The worst part about today was that the technical damage that was done by the gap-down deteriorated the promising pattern we had been forming and also broke below the hourly moving averages. That may now result in another test of the recent lows. If those lows don’t hold, the market could get some severe action to the downside, so we’ll be watching that carefully tomorrow.
The S&P 500 pattern is a lot different in that it’s way above its February and just above its recent lows. A breakdown below 1100, which is currently support, could see another 25-point slide into the 1075 area, where the February lows were.
On the Nasdaq 100, if we break the 1320-30 zone, we could very well prices slide below 1300 and get into the high 1200s at the very least.
So we’re in dangerous territory and the market needs to right itself quickly tomorrow morning, or the market may see some additional short-term severe negativity. |
