The market had a really bad day on Monday, closing at the lows for the day across the board. It doesn't get much worse than that and the technicals were very negative as well. What really surprised me was the severity of the decline. Not one intraday rally attempt was able to take out a prior rally peak. It just stair-stepped all the way down to the close at the lows. It was a very, very bad way to start the week.
However, I'm not totally surprised. As my previous columns had indicated, I had been advocating the short side at least for the short term, because I felt the market was overextended. The Dow was up 20% since the lows, the Nasdaq 35%. There was virtually no important retracement.
The worst part about today was the fact that the Nasdaq 100 gapped down, made lower lows all day, closed at the low and slightly violated its trend line which has been in force since the lows last month.
The market is due for some kind of snapback rally a some point tomorrow, but I'm most likely going to be looking to initiate several short positions on that, especially if the bounce lacks conviction. I feel the market is probably going to go into a retest mode over the next several days any way. We may see a fairly decent pullback here, anywhere from as little as one-third of the entire gain of the last several weeks to as much as two thirds, maybe even a full retest, although that's not what I'm anticipating.
The technicals today were 2-1 negative advance-declines on both exchanges. The up/down volume was 3 1/2 -1 negative on New York and about 5 1/2 -1 negative on Nasdaq. A very bad day today, indeed.
Across the board, all the stocks I follow were down except for a couple of specialty security stocks like Invision and SureBeam, which gapped up and ended substantially up on the day on good volume. The losers were led by Verisign down 3, Gemstar down 3, Broadcom and Checkpoint and Microsoft down 2 ½, Macrovision 2.80, Qualcomm 2.97, QLogic 2.86, Veritas 2, and several others down between 1 and 2 points. It was a broad decline.
As I had indicated earlier, I'm looking for some kind of retracement snapback tomorrow back up to about 1425-30, on the Nasdaq 100, and about 1090 or thereabouts on the S&P 500.Those are the resistance levels If we get that and it's not a convincing rally, we should roll over at that point and possibly come down harder over the next few days in more substantial retracement.
The breadth & volume on the first rally coming off this decline will be
important in determining the trend for the next few days, at least!
Good trading!
Harry
