Technically the market was short term overbought. Over the last few weeks I have been asking what exactly was said during that time that resulted in a 25% rally in the market.
Each day there is market related news. Some good some bad...
Well the last couple of years... mostly bad... but there are times that the market has ignored the bad news.
We just went through one of those periods of time...
Now if I had to guess I would expect that until we get at least a retest of the July lows that even good news is going to be ignored again for a while. That's not to say this is rational. It's not rational but really what about the market is truly rational? Here is some technical comments from Harry Boxer. I respect this guy although I do not pay for his advice either:
PULLBACK PHASE CONTINUES
thetechtrader.com
By Harry Boxer, The Technical Trader (www.thetechtrader.com)
The market opened firm but immediately sold off rather sharply , got to the morning lows just before 11 o’clock and then went for a small rally into the noon hour. At that point the indices started a steady down drift that lasted for the rest of the day ,selling off in an orderly channel. Only a late bounce prevented the indices from closing at the lows for the session
I had strongly felt early in the day that the market should get some kind of intraday snapback rally, but it didn’t. That’s how weak the market was on Tuesday. The market extended its losses of the last three days, as I had expected they would.
We were down another 95 on the Dow, 13 on the S&P 500, a whopping 44 on the Nasdaq Composite and 42 on the 100, mostly affected by a loss of 20 points, or 6 ½%, on the SOX semiconductor index.
A review of the technicals showed advance-declines were about 3-2 negative on New York, not too bad for a nearly 100-point loss today. Nasdaq was worse, however, about 22-10 negative. The up/down volume on both exchanges was pretty negative, with about a 2 ½-1 ratio on New York and about a 3 1/2 – 1 negative ratio on Nasdaq.
Total volume was a little better than yesterday, showing more volume to the downside on what was expected to be a fairly light day. We traded 1.2 billion on New York and nearly 1.5 billion on Nasdaq.
A review of my personal board today showed that all of the tech stocks were down with eBay off 2.04, IBM down 1.46, Broadcom down 1.39, and Amgen down 1.63. There were no gainers on my board today except for little OVTI, which gained a few cents today and is holding up nicely.
The key technical points of note today were that the Nasdaq 100 not only broke its rising trend line from the early August lows, but also broke its head-and-shoulders topping pattern, and the moving averages have rolled over, crossed over and given sell signals.
The S&P 500 moved below its rising trend line as well today, did not break the neckline of the head-and-shoulders pattern that it has, but also appears to be rolling over and we may be testing lower levels as I had expected over the next few days.
It remains to be seen if the market can extend the losses immediately or if it will rally first. I believe since we’ve come down rather sharply in the last couple days from about 1052 on the Nasdaq 100 to 971 today that we may get a snapback rally to test resistance up around 1000 or so on the Nasdaq 100. If the S&P 500 does not confirm the downside break on the Nasdaq 100 and starts to rally we may very well see some higher levels first.
But overall the market is still in the process of the pullback, retesting phase I’ve been looking for.
Good trading!
Harry |
