Wall Street Sees Biggest Drop in 4 Months!
By Harry Boxer, The Technical Trader (
www.thetechtrader.com)
The market had one of its nastiest days in months, the biggest price drop since February. The day started out with a big gap down on what traders interpreted as negative employment news. They went lower earlier in the morning, then bounced, forming bear flags. They were unable to get through their intraday declining moving averages on two or three occasions and worked their way lower all session fed by sharply higher crude oil prices. They did have a sharp, late rally that snapped the indices back a quick 15 points in 15 minutes on the Nasdaq 100, but it failed at initial resistance. The S&P 500 also failed at resistance around 1376, and they rolled over hard into the close, taking out the lows and closing at the lows for the day going away.
Net on the day, the Dow was down 395, the S&P 500 43 1/3, and the Nasdaq 100 down 64 3/4, closing at 1990.39, the low for the day. The Philadelphia Semiconductor Index (SOXX) was down 3 percent, or 12.05.
The technicals certainly confirmed the negative day, with a 5 to 1 negative ratio of decliners over advancers on New York, and a similar number on Nasdaq. Up/down volume was the story, however, negative by about 11 to 1 on New York. On Nasdaq it was about 9 to 1. New York traded just under 1 1/2 billion, and Nasdaq just under 2.2 billion.
TheTechTrader.com board had some outstanding issues to the plus side, particularly in the junior oils. Mexco Energy (MXC) was up 6.15, Pyramid Oil (PDO) up 1.57, and USO at 111.76, was up 7.81.
In addition, the QID was up 2.42 and the SDS up 3.66, the short instruments for the QQQQ and SPY.
DUG, the ultrashort oil & gas ETF, had a very usual and amazing session. Despite the fact that crude oil was sharply higher and despite the fact that the DUG gapped lower at the opening, dropping below 26, it then rallied steadily back the rest of the session, closing near the high for the day at 28.35, up 80 cents on the day on a very heavy 40 million shares traded.. The USO ( oil ETF), trading 33 million shares, traded its heaviest volume ever. So, with crude oil up $11 to over 139 per barrel, it certainly put pressure on the indices, and along with the employment report today it was a lose-lose situation for the market.
Despite all of that, and even though the S&P 500 broke below the neckline of a toppy-looking head and shoulders-type pattern and is at two-month lows, the Nasdaq 100 is far from it and hasn't even broken its rising trendline yet. So, some divergences are going on, and some climactic-type behavior on increasing volume.
But nothing definitive yet. The Nasdaq needs to confirm this, and although it had a nasty day today it still held above the lows for the week set on Tuesday.
Good trading!
Harry
