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Technical Trader Closing Brief

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Terrific Finish After Very Negative Start

Wed, Jul 23 2008, 06:23 GMT
by Harry Boxer

The Technical Trader

The markets had a terrific finish with very bullish implications after a very negative start. So it was a complete turnaround today after the indices gapped down, particularly on the Nasdaq 100, which was down very sharply before the opening.

The day started out with a gap lower. They then bounced sharply, backed and filled for several hours, looked like they potentially could roll over, but with the S&P 500 and Dow much stronger today they lifted the Nasdaq 100. A late very strong surge in the SPX, which in the last hour and a half ran from 1258 to 1277, prompted the Nasdaq 100 up sharply from 1793 to 1821. So a very strong finish.

Net on the day the Dow was up 135, the S&P 500 up 17, and the Nasdaq 100 up just 1 1/2. The Philadelphia Semiconductor Index (SOXX) had a very negative session, down as much as 22-23 earlier in the session, closing down 16.44 on negative news and earnings estimates. The SOXX, with a negative divergence today, will need to get going to help fortify the indices, as I would find it difficult to believe the market could have a very strong rally without the semiconductors participating.

The technicals were quite good, with advance-declines positive by 22 to 9 1/2 on New York and by 2 to 1 on Nasdaq. Up/down volume was 2 1/2 to 1 positive on less than 1 1/2 billion traded New York. Nasdaq traded almost 2.3 billion and had about a 2 to 1 positive ratio of on advancing over declining volume.

TheTechTrader.com board was mixed with as many stocks down as up. On the plus side, the DUG snapped back 1.60 on more weakness in crude oil, which dropped below 1.26 at one point today, closing down $3.

The airlines were very strong today, with Continental Airlines (CAL) up 4.01 to 13.26, American Airlines up 2.52 to 9 1/4, and United Airlines up 3.42 to 8.41. So a very strong session for the transportation group.

Portfolio position Acordia Pharmaceuticals (ACOR) was up 1.53, the only point-plus gainer on our board other than DUG.

On the downside, the USO dropped 3.35 on the price of oil dropping, and solar energy stocks were very weak. Canadian Solar (CSIQ) was down 4.20 to 27.78, reaching as low as 26.82 earlier in the session. Pyramid Oil (PDO) fell 1.80, and DryShips (DRYS) dropped 2.58 in the shipping sector.

Stepping back and reviewing the hourly chart patterns, as indicated earlier the indices gapped lower, consolidated most of the session after a morning snapback, and then ran hard into the close, closing at the high for the day going away. It was a very impressive session for the indices, particularly the SPX, which now sports a right hand extended V bottom, and has not violated the moving average on the hourly charts, even with the pullback yesterday.

The NDX, even though it did make a low below the moving averages, snapped back to there at the close today, and still has a chance of completing a head and shoulders type bottoming pattern. But it will take some work, as the index needs to get over 1870 to do that. Right now it's only at 1821 and change, and hasn't even broken out of the declining topsline going back to early June. A move over 1830 for starters would get that accomplished.

Published on  Wed, Jul 23 2008, 06:26 GMT