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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Markets Strong Sell Off Breaks Support Level

Stock-Markets / US Stock Markets Jan 07, 2009 - 04:52 PM GMT

By: Harry_Boxer

Stock-Markets The stock market had a strong sell-off today on negative individual company and economic news. The market indices gapped sharply lower as the futures were down sharply before the opening. They then bounced back a couple times to test resistance and failed both times, and in the afternoon as a result of that they rolled over steadily and sharply, reaching new 2-day pullback lows under 1230 on the Nasdaq 100 and under 902 on the S&P 500.

They did bounce late in the session, but net on the day it was a negative session for sure, with the Dow down 245, the S&P 500 more than 28, and the Nasdaq 100 nearly 36. The Philadelphia Semiconductor Index (SOXX) fell 11.44, a loss of more than 5 percent.

The technicals confirmed the very weak day on the Street. Advance-declines were negative by more than 4 to 1 on New York and by less than 3 to 1 on Nasdaq. Up/down volume was the real story, though. The NYSE had 145 million shares up and nearly 1.1 billion down on New York, about a 7 1/2 to 1 ratio, on total volume of 1 1/4 billion. Nasdaq traded over 2 billion and had a 3 1/2 to 1 negative volume ratio. board had a very negative session. Multiple-point losses included SunPower (SPWRA), down 4.17 to 38.07, with a low of 36.68 today, and DryShips (DRYS), down 2.27 to 12.96 on 26 1/2 million shares. We took big profits on both of those model portfolio positions recently. Energy Conversion Devices (ENER) dropped 2.47 to 26.74.

Agriculture stocks had a negative session. Potash (POT) dropped 4 points off its high, closing down 77 cents on the day. Agrium (AGU) fell 1.23, Mosaic (MOS) 12 cents, and CF Holdings (CF) 1.99.

The U.S. Oil Fund ETF (USO) fell 3.99 to 33.27 on the sharp drop of more than $5 in the price of crude oil. Bull ETFs had a negative session, with Direxion Large Cap Bull 3X Shares (BGU) down 3.44, the Ultra Oil & Gas ProShares (DIG) 2.67, the iShares FTSE/Xinhua China 25 Index (FXI) down 2.26 and iShares MSCI Brazil Index ETF (EWZ) 2.39.

Hartford Financial Services (HIG) fell 1.77 to 17.91, Questcor (QCOR) 1.46 to 7.39, and Apple (AAPL) dropped 2 points 91.01.

On the plus side, the outstanding stock today was NetScout Systems (NTCT), up 3.05 to 13.29 on strong earnings guidance and upgrades. Short ETFs did well, of course, with the Ultrashort QQQQ ProShares (QID) up 2.75 and the Direxion Large Cap Bear 3X Shares (BGZ) up 4.57.

Stepping back and reviewing the hourly chart patterns, the indices plunged at the opening, failed to get through resistance, and then made lower lows all day before snapping back late in the session. But they may have broken the back of the recent uptrend, and short-term support was violated.

So we'll have to see if they can recover quickly tomorrow, or whether they're headed lower for the next few days.

Good trading!


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