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DOWNSIDE FOLLOW-THROUGH (FOR A CHANGE!)
By Harry Boxer, The Technical Trader (www.thetechtrader.com)

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The market had a downside follow-through this morning and then tried a rebound snapback rally that failed at resistance and then the indices went lower. Around 10:30 they stabilized, and for the rest of the day the Nasdaq 100 moved in about a 10-point range. The S&P 500 did so as well, but it broke down in the afternoon and made a lower low . A last-hour rally took them back up towards resistance and pulled them off the lows for the day.

Net on the day, the Dow was down below 9,000 at 8980, down 83 points. The S&P 500 was only 3 points off the low, down nearly 12. The Nasdaq Composite was down 23 ½, the Nasdaq 100 17 ½. The SOX Index was down around 3 percent.

The technicals confirmed the negative day. Advance/declines were around 2 to 1 negative on both exchanges. Down volume was worse, however, with 1.4 billion down & only 400 million up on Nasdaq,a 3 ½ to 1 ratio. NYSE volume saw about a 4 to 1 negative plurality with 1.3 billion traded there.

It was a negative follow-through –- something we haven’t seen in a while -- to a negative day on Friday. So it’s very conceivable that we may have broken the back of the intermediate uptrend. But I do expect a snapback rally to test resistance before we head lower. The quality of that rally, whether it be on low volume and with poor technicals or not, will tell me whether or not the market rally may be done for the time being.

My personal board was very mixed today. IBM, which was leading the way on the downside last week, was actually up 1.95 today. That was one of the leaders on my board. Low-priced GERN, a biotech stock, was up 1.10 on heavy volume. Among other biotech stocks that broke out was OXGN, up more than 5 points today on tremendous volume.

On the downside, several popular stocks had bad days today. Among them, QLogic, on two downgrades, was down 2.10. OmniVision was down nearly 2 points. InterDigital, down 1.20, took it on the chin today. Everything else was fairly fractionally mixed.

Stepping back and reviewing the patterns, we came down hard over the last couple days and tried to stabilize today. Key support is just beneath current levels at around 1180 on the Nasdaq 100 and around the 960-65 zone on the S&P 500.

I’m not sure whether that will be tested first or whether we move up and test overhead resistance in the 1215-20 range on the Nasdaq 100 and up around the 982-84 zone on the S&P 500 before we head lower. So we’ll see which direction we take tomorrow.

Good trading!

Harry