Today was one of the most amazing days I’ve seen in a long, long time. The market gapped down at the opening, dropped steadily and sharply all morning, bounced just around lunch hour, failed at resistance and then backed off and took out the lows slightly. It actually double-bottomed in essence on the Nasdaq 100 near 1380, with a similar occurrence on the S&P 500 around the 1076-7 area.
Then we had a phenomenal two-hour rally that was straight up and just as impulsive looking on the upside as it was in the morning to the downside. So it was a dramatic reversal which took the Dow nearly 200 points from top to bottom, closing up 25 on the day after being down more than 170. The S&P rallied 21 points, closing up nearly 2, but the Nasdaq 100 and the Composite were still down slightly, with the NDX down 7 and the Composite down 5 ¾. Part of that was due to the SOX being down 8 points ,although that was off as much as 22-23 earlier in the morning, but that came back with a roar as well.
To boot, the indices closed at the highs for the day going away on most of the indices ,a tremendous close. The shorts sure got squeezed. The put/call ratios and the oscillators were very extreme at the lows today, and I wasn’t surprised to see a rally.
Reviewing the technicals, they were extremely negative this morning, and did come back but ended down on the day, as often happens on reversal days. Advance-declines on New York weren’t bad. They were 17 to 16 negative. Up/down volume was almost dead-even flat with a total of 1.65 billion traded. Nasdaq was worse today. Advance-declines were 17 to 14 negative and up/down volume was about 11 to 6 negative with a total of 1 ¾ billion traded.
My personal board was very mixed. But obviously stocks came way off their lows. The star of the day was security stock MAGS again, snapping back with a roar from 12.87 to 15.10 and closing at 15.04, up 1.85. It led the pack in the security group. MACE, a low-priced security play, jumped from 4 to 5, closing right at the highs for the day, a strong gain there as well. And many other stocks came back and closed in the positive column, but marginally so.
Navarre (NAVR), which has been strong of late, displayed relative strength all day and closed over 10, up 29 cents.
Yesterday’s star, LTON, jumped from 10.20 to 11.50, closing right at the high, up 69 cents, a tremendous reversal there. And China Yuchai (CYD), after suffering some profit-taking in the morning, jumped 1.40 off the low, closing up around 28, near the highs for its current rally.
Stepping back and reviewing the overall patterns, the significance of today’s move was that we came down hard into a spike low and not far from the March lows on the Nasdaq 100, reaching under 1380. The March lows were about a little less than 10 points from there. The S&P, of course, did take out the March lows both Monday and then again today, making a lower low today. But a strong rally and the speed and impulsiveness of it was indeed impressive and to me indicates a strong possibility we’ve seen a short-term low, at least here.
The key will be to follow-through in the next day or two, and we’ll be watching overhead resistance at NDX 1420-22, which we should test tomorrow morning, and above that 1430-32. On the S&P 500 resistance is at the 1100-02 area and then above that the 1107-1110 zone.
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