Stock Market Decisive Crack of Five-Week Uptrend

By: Harry_Boxer

The stock market indices suffered a very negative setback today, with huge opening gaps to the downside. They then plunged to lower lows, and by mid-day reached their session lows on the Nasdaq 100. They attempted a snapback, which failed twice at resistance near 1850 NDX and 1094 S&P 500, and rolled over into the close with the SPX closing not far off the lows. The Dow was down as well. The Nasdaq 100 did fair a little bit better and closed about 7 points off its low, but still suffered a significant loss.

Net on the day, the Dow was down 265.42 at 10,378.83. The S&P 500 fell 31.59 at 1089.47, closing right at that 1088.90 key support zone. So tomorrow should be a very important day for the trend. The Nasdaq 100 was down 53.86 at 1845.38.

The technicals certainly confirmed the negative day, with declines leading advances by 6 to 1 on New York. Up/down volume was more than 30 to 1 negative, with a total of 1.150 billion shares traded. The vast majority of that, more than 95%, was to the downside.

Nasdaq was even worse with advance-declines at about 9 to 1 negative, and up/down volume nearly 22 to 1 negative. Total volume was a hefty 2 1/4 billion on Nasdaq.

Charts of the Day:

Today I'm going to cover some of the ultra-short ETFs that we've been trading over the last few weeks.

The Direxion Daily Emrg Mkts Bear 3X Shares (EDZ), which has been in a terrible decline, rallied in April and May, and came down in June. The June rally was not as strong as the BGZ, as the emerging markets didn't do as poorly. But then it went into a very neat, declining, orderly channel, with a 5-wave decline. It based out over the last several days, and then today gapped up, trading the heaviest volume in several weeks, and closing up 3.29, or 9.55%. Immediate goal would be to test and then take out the 38 1/2 area, which may be done tomorrow. We're at that level in the aftermarket. The declining topsline is around 40. The declining 50-day moving average is around 42, my initial trading target on a breakout. Secondary target is up around the 50-51 zone.

UltraPro Short S&P500 ProShares (SPXU), also in a falling wedge, broke out today with an 8.3% jump, up 2.46 on 7 1/3 million. It gapped up above the 10-day moving average, and broke above the 21. There's a minor target around 33 1/4 we expect may be reached tomorrow. The secondary target up around 35 3/4, and intermediate target up around 40 - 41.

IPath S&P 500 VIX Short-Term Futures ETN (VXX) has a falling wedge that was broken today as well. Not as big a thrust, up 7% or 1.53, but enough to say that I think we've broken the trend. Volume is picking up a little bit, and we could see a move that tests the 25-25 1/2 zone, my next trading target. Beyond that I'm looking at 28, possibly even as high as 32 - 33, if we get a real ugly market to the downside.

Reviewing our Watchboard:
TheTechTrader.com board was all negative, except for one stock and some of the ultra-short ETFs. That stock was portfolio position Netlist Inc. (NLST), which reported earnings after the close. It was up 7 cents at 3.05, just a few cents off its high for the day.

However, on the downside, multiple big-point losses included Cree Inc. (CREE), down 9.15 at 59.81, Apple Inc. (AAPL) 9.22 at 250.19, Google Inc. (GOOG) down nearly 12 at 491.74, Goldman Sachs (GS) 4.65 at 149.25, and Amazon.com Inc. (AMZN) down 4.11 at 125.89.

Other multiple-point losses were Transocean Ltd. (RIG) down 2.30 at 54.16, ADTRAN Inc. (ADTN) 1.51 at 30.21, Acme Packet, Inc. (APKT) 1.35 at 31.44, BP Exploration plc (BP) 1.32 at 38.79, Dendreon Corp. (DNDN) 1.74 at 36.90, OmniVision Technologies Inc. (OVTI) dropped 1.70 at 22, and Valassis Communications Inc. (VCI) 1.76 at 31.93.

There were several other point-plus losers, but too many to mention here.

On the plus side, the short ETFs, which are highlighted in our Charts of the Day video, had a stellar day as our day trade picks fared very well there. The Direxion Daily Emrg Mkts Bear 3X Shares (EDZ) was up 3.27 at 37.72, Direxion Daily Small Cap Bear 3X Shares (TZA) 3.68 at 35.75, iPath S&P 500 VIX Short-Term Futures ETN (VXX) 1.54 at 22.84, and Direxion Daily Financial Bear 3X Shares (FAZ) 1.37 at 14.98. In addition, the Direxion Daily Large Cap Bear 3X Shares (BGZ) advanced 1.16 at 14.92.

It was a very negative day on Wall Street, and a decisive crack of the recent 5-week uptrend. They closed right at key support levels near the 1840-45 zone on the NDX and the 1088-90 zone on the S&P 500.

Any downside follow-through tomorrow that cracks support could accelerate sharply, so it will be a very critical day to see how well the market fares and whether or not the downtrend is just beginning.Good trading!

Good Trading!

Harry

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