Stock Market Rally Loses Steam in Narrow Up-Session

By: Harry_Boxer

The stock market indices managed to eke out a gain today, but the path to those gains was a little choppy.

The day started out with a sharp move higher. The Nasdaq 100 got to 1831.62 and the S&P 500 got up to 1080.78, and then they sold off sharply to new lows for the day. But they held right at support near 1810 NDX and 1070 SPX, and then began a move back upward. By mid-afternoon they stalled and ground back and forth, firming up a little bit in the last half hour to close in the plus column.

Net on the day, the Dow was up another 18.24 at 10,216.27, the S&P 500 up only 79 cents at 1078.75, and the NDX up 6.24 at 1821.03.

Technicals were negative by 19 to 11 on declines versus advances on the New York Stock Exchange and by more than 1000 on Nasdaq at 1856 losing issues to 811 winners. However, up/down volume was only 4 to 3 negative on New York with total volume under 3/4 of a billion. Very light today. Nasdaq volume was positive by 10 to 7 with nearly 1.75 billion traded. So, it was a mixed session today.

Charts of the Day:

Today we're going to cover some of the members of the Boxer Shorts List that are looking particularly negative.

Almost Family Inc. (AFAM), a healthcare-related service firm, had a big run up off the early March lows like many stocks did in 2009, taking it from about 14 all the way up to 43 and change. The stock rolled over in May, bounced, formed a little bit of a bear flag, completed a topping pattern, broke down with a big breakaway gap to the downside, taking out the neckline at around 33.57. It was barely able to bounce, forming a little bear flag and appears that it may not be over yet to the downside. Looking for a move that takes it down into the low 20s, my short-term trading target, to test the July low.

Amedisys Inc. (AMED) is another health care related stock that is crumbling. It created a topping pattern, took that out with a breakdown in May. It kept edging lower, spiked down a week and a half ago, and now has formed a bear wedge. If it cracks this pattern to the downside, we're going to see lower levels. Looking for a potential move down to test the 28 1/2 level on a short-term basis, my initial trading target.

CareFusion Corporation (CFN), medical instruments and supplies, topped over the course of the last several months, broke the neckline of the kind of head-and-shoulders top. It bounced a little bit, but it backed off again. This stock looks weak and is not responding very well. We could see a full-fledge return to sender all the way back down to 18 - 19 level, my short-term trading target.

Diamond Offshore Drilling Inc. (DO) cracked at the 84 level in May, went all the way down to the mid-50s, bounced, backed and filled, and now it's formed a big bear wedge. Should this break to the downside, this pattern could quickly retest the lows around 54, another 10 points down. If that's taken out, there's a substantial amount of support in that zone going back to 2008-09. Short-term we're looking for a retest of the lows at 54-55.

Reviewing our Watchboard:

TheTechTrader.com board, as a result, was mixed today. Most of the stocks were very narrowly changed today, but the majority of them were on the downside. However, there were several point-plus gainers today. Leading the way today was InfoLogix, Inc. (IFLG), which jumped 1.37 at 6.17, a substantial percentage gain there.

Larger-cap stocks included Google Inc. (GOOG) up 8.34 to 475.83, Amazon.com Inc. (AMZN) up 2.25 to 119.51, BP Exploration plc (BP) up 2.71 to 36.76, Transocean Ltd. (RIG) up 2.23 to 54.06, and Cree Inc. (CREE) up 1.05 to 67.17.

Two of the ultra-short ETFs actually gained today. The Direxion Daily Emrg Mkts Bear 3X Shares (EDZ) was up 1.10 at 41.32 and the Direxion Daily Small Cap Bear 3X Shares (TZA) up 1.17 at 37.78.

On the downside, loss leaders included Apple Inc. (AAPL) down 2.34 at 257.29, as consumer reports failed to recommend their new iPhone. The only other point-plus loser was Valassis Communications Inc. (VCI), down 1.89 at 30.10.

Stepping back and reviewing the hourly chart patterns, the indices were up sharply at the opening, down sharply by mid-morning, and then had a slow grind back up the rest of the day to bring the indices just back up to the plus column. With technicals as negatively confirming as they were today, the market appears to be losing momentum and could back off more substantially over the next couple days to retest.

Good Trading!

Harry

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