Closing Analysis

Will Key Support Hold?

Closing Technical Market Analysis for Fri October 19th 2012

The stock market indices suffered one of the worst declines of the year today as the early action turned extremely negative. The indices started to fall from the opening, stabilized midday, formed little bear wedges and flags, and rolled over. In the afternoon they managed to stair-step their way lower, reaching as low as 2676 on the Nasdaq 100 at one point. They bounced back up to 2685 on three occasions in the last couple hours, couldn’t get through, and in the last 15 minutes slipped back hard. The S&P 500, which had drifted all the way back down from the earlier high around 1458 to 1430, snapped back to 1436, but that was the best it could do, and closed near 1433.

Net on the day, the Dow was down 205.43 at 13,343.51, the S&P 500 was down 24.15 at 1433.19, and the Nasdaq 100 closed down 65.85 at 2678.32.

Advance-declines were about 4 to 1 negative on the New York Stock Exchange, and a little worse than that on Nasdaq. Up/down volume was nearly 9 to 1 negative on New York, with total volume of just under 880 million shares. Nasdaq traded over 2.2 billion, and had a 6 to 1 negative volume ratio. board was mixed but mostly lower. The Nasdaq 100 large-cap stocks got crushed as Apple Inc. (AAPL) was down 22.80 to 609.84. Google Inc. (GOOG) lost 13.31 to 681.79, Amazon Inc. (AMZN) dropped 4.85 to 240.00, International Business Machines Corp. (IBM) gave back 1.60 to 193.36, but the biggest loss for the day by far on earnings was Chipotle Mexican Grill, Inc. (CMG), which plunged 42.93 to 243.00.

Pharmacyclics Inc. (PCYC) lost 6.13 to 62.24, SodaStream International Ltd. (SODA) 2.01 to 37.04, Netflix, Inc. (NFLX) 2.38 to 64.98, Goldman Sachs (GS) 1.53 to 123.62, First Solar, Inc. (FSLR) 1.60 to 23.54, Cornerstone OnDemand, Inc. (CSOD) 1.00 to 28.99, Cliffs Natural Resources Inc. (CLF) 1.34 to 44.45, and Peabody Energy Corp. (BTU) 1.55 to 25.89.

Biotech stocks had a bad day as well. Sarepta Therapeutics, Inc. (SRPT) was down 2.12 to 24.41, Onyx Pharmaceuticals, Inc. (ONXX) lost 2.81 to 85.19, and Affymax, Inc. (AFFY) gave back 2.87 to 24.47.

There were some gainers on our board today. Puma Biotechnology, Inc. (PBYI) was up 5.88 to 22.38, or 36%, on 2.6 million shares. magicJack VocalTec Ltd. (CALL) gained 2.57 to 23.03, Riverbed Technology, Inc. (RVBD) 2.37 to 23.06, and Capital One Financial Corp. (COF) 3.45 to 60.74.

ManpowerGroup (MAN) was up 3.55 to 39.53, and Robert Half (RHI) up 1.31 to 27.24, both in the staffing sector.

Ultra-long iPath S&P 500 VIX ST Futures ETN (VXX) jumped 2.12 to 34.99, or 6 1/2%, but the ProShares Ultra VIX Short-Term Futures ETF (UVXY) was up 3.33 to 28.96, or 12.6%.

Stepping back and reviewing the hourly chart patterns, the indices opened lower, came down hard and sharply until midday when they tried to stabilize but failed to do so, and broke their bear flags and went lower in the afternoon. They finally stabilized in the last half hour and snapped back, but to no avail as the rally failed several times to get through key resistance. In the last 15 minutes, they sold off into the close. The NDX sold off from 2785 to 2678, more than 100 points in just the last few sessions. They were oversold short-term, but they broke key support. The S&P 500 came down hard from 1463 to 1430, and broke some initial support today, but key support around 1427-30 zone is still holding on for dear life. If that breaks, the whole market could fall apart.

We’ll have to wait and see what happens on Monday.

Good Trading!


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