Closing Analysis

A Decisively Negative Day

Closing Technical Market Analysis for Wed October 24th 2012

The stock market indices had a rough day today, despite big gap ups at the opening. The Nasdaq 100 opened strong and moved up to yesterday’s midday highs, but couldn’t get through the 2686 area. The S&P 500 popped to 1420 resistance, and both failed right there. They immediately sold off, particularly the NDX, which dropped dramatically just before the noon hour from 2686 down to 2655. That’s 31 points lower. The S&P 500 fell in a 3-step fashion from 1420 to 1412. They then bounced midday, and formed rising wedges. The FOMC announcement caused some volatility, and the wedges were broken to the downside. They fell steadily into the close before bouncing a bit, only to back off again, but they all closed down on the day.

Net on the day, the Dow was down 25.19 at 13,077.34, 14 points off the low and 80 points off the high. The S&P 500 was down 4.36 at 1408.75, 1 1/2 points off the low and 12 points off the high. The Nasdaq 100 lost 10.47 to 2655.55, 2 points off its low and 31 points off its high.

Advance-declines were 16 to 13 negative on the New York Stock Exchange, and 13 to 10 negative on Nasdaq. Up/down volume was 2 to 1 negative on New York, with total volume of 641 million shares. Nasdaq traded 1.9 billion, and had a 11 to 7 negative plurality. board was mixed. Leading the way down today was Amazon Inc. (AMZN), down 5.82 to 228.49, and Netflix, Inc. (NFLX), which dropped 8.10 to 60.12. Google Inc. (GOOG) was down 3.05 to 677.30, but traded 10 points higher earlier.

Other gainers of note included Facebook, Inc. (FB), on earnings, which jumped 3.73 to 23.23, or 19%, on 228 million shares, the second biggest volume in its history after the IPO day. Ellie Mae, Inc. (ELLI) advanced 2.22 to 25.31, while Patrick Industries Inc. (PATK), one of our swing trades, was up 1.39 to 19.49, and SolarWinds, Inc. (SWI) 2.01 to 51.85.

In addition, Monster Beverage Corporation (MNST) was up 6.86 to 47.97, Silicon Laboratories Inc. (SLAB) up 4.92 to 41.03, Molina Healthcare Inc. (MOH) 3.08 to 25.81, and Lumber Liquidators (LL) 5.67 to 55.81. Those were among the large multiple gainers on our board today.

Fortune Brands Home & Security, Inc. (FBHS) gained 2.23 to 29.29, Tupperware Brands Corporation (TUP) was up 4.85 to 59.07, Avery Dennison Corporation (AVY) 2.50 to 32.25, PolyOne Corporation (POL), and Yelp, Inc. (YELP) 1.77 to 25.77.

Also, Gilead Sciences Inc. (GILD) was up 3.43 to 68.34, and AEP Industries Inc. (AEPI) gained 2.40 to 65.09.

On the downside, in addition to the stocks mentioned above, several stocks had a difficult session. Newfield Exploration Co. (NFX) was down 5.86 to 27.46, or 17 1/2%. Tempur Pedic International Inc. (TPX) dropped 6.21 to 25.66, or 191/2%. United Therapeutics Corporation (UTHR) lost 8.29 to 44.99, or 15 1/2%, while Nationstar Mortgage Holdings Inc. (NSM) gave back 3.35 to 31.51, and Buffalo Wild Wings Inc. (BWLD) fell 8.76 to 74.70, or 10%.

Stepping back and reviewing the hourly chart patterns, the indices opened sharply higher, immediately sold off midday, took out support lows on the NDX, but not on the S&P 500. That encouraged traders to buy, but wedges formed, and they were broken in the afternoon. The S&P 500 closed right near yesterday’s lows, and the entire low pullback, as did the NDX.

So we’re in a precarious position here, because any lower levels and we can see a dramatic sell-off. At that point, it may result in a bigger snapback rally, because we will probably be getting oversold enough for a better rally to ensue.

Let’s see how tomorrow goes.

Good Trading!


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