Sector Investing

[ReturntoSender]

INDICES NEARING CRITICAL SUPPORT
By Harry Boxer, The Technical Trader (www.thetechtrader.com)

http://www.thetechtrader.com/closing/index.php?HTTP_REFERER=(none)

The market ended very narrowly mixed on Monday. But the session started out with a gap up and quickly went to the highs for the session on the Nasdaq 100 and S&P 500, as well as the Dow. They then had a strong sell-off for the rest of the morning into the lunch hour that tested Friday afternoon’s lows successfully. That led to an early afternoon rally that got up near the S&P 500 earlier highs but nowhere near the Nasdaq 100 highs. Then they rolled over in the afternoon again, retested the lows and bounced one more time before selling off into the close, closing not far off those very important support lows of 1200 on the Nasdaq 100 and 974 on the S&P 500.

Net on the day, there were very small changes. The Dow was down 1; the S&P was down 1.5; and the Nasdaq Composite was off only 2.5. So it was extremely narrowly mixed at the close. Advance/declines were very mixed as well with about 1600 each way on NYSE, and about 1600 to 1500 negative on Nasdaq. The up/down volume was about even with a total of about 1.6 billion traded on NYSE and 1.7 billion on Nasdaq.

Obviously, overall net on the day the picture was very narrowly mixed and it felt like distribution to me, but we’ll see how it goes tomorrow. I think short-term market direction will be determined in the next 24 to 48 hours and right now I’m favoring the downside. The market has continually failed to get through resistance levels, but it has held support so we’ll see what gives tomorrow.

A review of my personal board shows a very mixed picture, as well. Very few stocks rose or fell as much as a point, as witnessed by the narrow changes among technicals.

Standing back and taking an overall look at the charts, the patterns of the Nasdaq 100 and S&P 500 have the appearance of topping, but until they’re completed to the downside there could still be consolidation. And as I mentioned last week, I am favoring the downside at this point due to the myriad of sell signals on many of the technicals that I follow.

So be careful here. Protect your long positions with stops and we’ll see if the support gives way tomorrow. Beneath the 1200 support on the Nasdaq 100 we have critical 1180 support, and beneath the 974-975 support on the S&P 500 we have 960-965 area, which is also critical. That will determine whether or not it’s just a shallow sell-off and pullback we’re seeing or if it becomes something much worse and perhaps a test of much deeper levels.

Good trading!

Harry