Stock Market Short Term Support & Trend Lines Broken

Stock-Markets / US Stock Markets Dec 04, 2008 - 09:53 PM GMT

Best Financial Markets Analysis Article The indices had what appeared to be a constructive morning, as they moved back and forth in a fairly narrow & orderly manner, getting several swings that were unable to break out or down, until the afternoon when they ultimately rolled over hard.

The day started out with a move down on lower pre-market futures. But they immediately rallied much like yesterday morning, in a pullback, retest, and then moved to higher highs, reaching near 1169 on the Nasdaq 100 and over 875 on the S&P 500. They then pulled back in an orderly manner and by mid-day bounced off the session lows and the 3-day trendlines. But the rally failed to break out across key resistance, and then they rolled over sharply, with the Nasdaq 100 dropping from 1157 to 1110 in less than an hour. The SPX dropped from 870 to 834 in the same period of time. They did get a late bounce in last 20-30 minutes that brought them back substantially off the lows and prevented them from closing at the lows.

But it was a negative day on the Street at the end, with the Dow down 215, the S&P 500 down 25 1/2, and the Nasdaq 100 down nearly 38. The Philadelphia Semiconductor Index (SOXX) was off 11.43, a sizeable percentage loss of nearly 6 percent.

The technicals were negative by 23 to 8 on declines over advancers on New York and by 20 to 8 1/2 on Nasdaq. Up/down volume was about 3 1/2 to 1 negative on New York on total volume of under 1.5 billion. Nasdaq traded under 2.1 billion and had about a 5 1/2 to 1 negative volume ratio.

So, a decidedly negative day on the Street today, ahead of tomorrow's eagerly awaited employment news.

TheTechTrader.com board as a result of today's action was mostly negative. The leaders, of course, were the ultrashort instruments. The BGZ was up 5.57, the SDS 5.23, and the QID 3.91.

On the reverse side, the long ETFs got hammered, with BGU down 2.63, the DIG on lower oil down 3.93, the EWZ down 1.24, and the FXI 1.40. The QLD lost 1.35. The USO dropped to a new all-time low at 35.41, down 2.64, as oil continued to get pounded, now $105 off its high just a few months ago.

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Apple (AAPL) had a rough day, down 4.49, and Energy Conversion Devices (ENER) gave back 2.57 from yesterday's sharp gains. SunPower (SPWR) lost more than 4 1/2 points off its high, closing down 4.33 on the day, an exact reversal of yesterday's big gains.

The agriculture stocks got hit today, with Potash (POT) down 3.21, Agrium (AGU) 1.44, CF Holdings (CF) 1.72, and Mosaic (MOS) 61 cents.

Emergent BioSolutions (EBS) had a tough day, down 1.71 to 21.92. Research in Motion (RIMM) gave back 1.76 to 37.20.

Morgan Stanley (MS) jumped 1.09 to 14.94 on 45.6 million shares.

Stepping back and reviewing the hourly chart patterns, we had a bullish consolidation type pattern that gave it up late in the session and broke key short-term support, taking out 3-day trendlines as well and testing lower levels. The late snapback kept the indices, particularly the NDX, from falling out of a 3-week wedge pattern. We'll see if there's any downside follow-through tomorrow, or whether they recover from this. It'll be a very interesting Friday, as the employment reports will let us know better about the market wants to do.

Good trading!

Harry

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