NORMAL RETRACEMENT, BUT WE STILL NEED A FOLLOW THROUGH
By Harry Boxer, The Technical Trader (www.thetechtrader.com)
Today was yet another disappointing non-follow-through day. However, I’m still of the opinion that yesterday’s move was so impressive from the standpoint of strength and technicals that today’s pullback was within the normal range of acceptability. The indices pulled back about a third of what they gained yesterday, which is a normal retracement, and even though they closed at the lows for the day the overall volume was lower than yesterday on the pullback, which is also bullish.
The indices still closed above support and if in the next day or two the market stabilizes ,moves back up and takes out strong resistance we could still be on our way up, but we’ve got to be very careful here and play it “close to the vest”.
A review of the technicals today showed that the advance-declines on New York were a little bit less than 2-1 negative. Up/down volume was 2 ½-1 negative, but overall volume as I had mentioned was less than 1.2 billion versus about 1.67 billion yesterday on the NYSE. On Nasdaq advance-declines were about 2-1 negative as well. Up/down volume was about 5-1 negative, with 1.5 billion down only 281 million up. However, the overall volume was about 1.75 billion versus 2.2 billion yesterday, so we had a lower volume pullback on Nasdaq today, as well.
All but one stock on my personal trading board was down today. That was InterDigital (IDCC), which had a very good earnings report and was up sharply in the morning. Even that one gave back a good portion of its gains, only closing up 61 cents after being up nearly 1 3/4.
The losers were led by Microsoft today, which put a lot of pressure on the indices and was down 2.85, closing up only about a quarter off its low. Additional losers included Broadcom down 2.59, Brocade 1.92 and Veritas 1.74. Several others were also down more than a point .
Looking towards tomorrow, the 21- and 40-day moving averages on the Nasdaq 100 hourly chart are crossing over, a potentially bullish signal. That’s a support level around 1224, with price support around 1228-30. I would look for the NDX, if it does pull back further, to hold around those levels. On the S&P 500 I want to see the 1069-70 zone hold. We’re not that far from there, so we’ll need to right ourselves fairly early tomorrow morning and then start to move back up.
Resistance right now is at today’s mid-day high of around 1265 and then yesterday’s closing high of up around 1281. Beyond that we have a chance of making another big move and perhaps establishing an important low.
The indices are still vulnerable on the downside because of yet another failure-to-follow-through day. However, I have a sneaking suspicion this may be different this time.
Good trading!
Harry
(c)2002, The Technical Trader (www.thetechtrader.com), published by AdviceTrade, Inc. and Century-Pacific Investments. Harry Boxer is an award-winning, widely syndicated technical analyst and author of The Technical Trader, which features a real-time diary of Harry's minute-by-minute trades and market insights, plus annotated technical charts & stock picks, based on Harry's 30 years experience as a Wall Street technical analyst. |
