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Very Negative Technical Damage
By Harry Boxer, The Technical Trader (www.thetechtrader.com)

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The second half of the year started off with a very negative down session. Stocks opened lower, dropped sharply all morning, bounced around mid-day, rolled over again in the early afternoon and with a couple of hours to go reached their lows for the day. We had what I would consider a corrective rally back to resistance that basically failed to break out, and the market backed off again late in the session.

Net on the day, the Dow was down 102, the S&P 500 down nearly 12, Nasdaq 100 about 27, the Composite 32, and the SOX Index down more than 18 or nearly 4 percent today, and that really put pressure on Nasdaq all day.

Advance-declines confirmed the negative session although it was a lot worse on Nasdaq than on New York. Nasdaq had a 21 to 9 negative plurality of advances to declines, and about a 3 to 2 negative plurality on the New York. However, up/down volume was very negative by nearly 4 to 1 on New York, and more than 4 to 1 on Nasdaq. Total volume on New York was about 1.45 billion, Nasdaq was about 1 ¾ billion. So increasing volume to the downside – not a good sign.

As indicated, the SOX and the SMH semi-conductor group in general were very weak today. Broadcom (BRCM) was down $1.78, the SMH down $1.42 as a result, and Intel (INTC), QLogic (QLGC) and most major semi-conductor stocks had a very negative day today.

Software stock Astea (ATEA) was up 69 cents in a snapback mode but on low volume. Nanogen (NGEN) had a particularly strong day today up 48 cents on 3.6 million and is looking very attractive as it broke out above a 2-month resistance level today. Taser (TASR) snapped back on a contract announcement after morning losses, and closed up about half a point. And low-priced Zonagen (ZONA), on positive drug news, was up 2 points today on heavy volume, a leading percentage gainer on Nasdaq.

Stepping back and reviewing the overall patterns, we saw very negative technical damage today. The Nasdaq and S&P broke down below their rising moving averages on their hourly charts, took out several layers of minor support including one important level of support around the 1487-90 zone on the Nasdaq 100 and the 1130-31 area on the S&P 500 before moving lower, and then tested secondary important support which did hold. The 1477-80 zone held, and the market snapped back off of that on the NDX. The S&P 500 rallied off lows of the last couple of weeks which were down around the 1122-23 zone, and then snapped back; but if there is any downside follow through in the next few days, the market is going to be in trouble, and we will be watching that carefully.

TheTechTrader.com will be closed tomorrow ahead of the 4th of July holiday and back again on Tuesday. A restful holiday weekend to everybody!

Good trading!

Harry