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Technical Trader Closing Brief

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Late Sharp Snapback Rally Pares Losses in Half as Dow Closes Under 10,000

Tue, Oct 7 2008, 06:46 GMT
by Harry Boxer

The Technical Trader

The markets had another historic day today with extreme volatility both up and down, mostly to the downside early. The indices opened sharply lower on a gap-down and slid hard, had a sharp morning bounce that took the NDX from 1358 back to 1406 , nearly a 50-point rally. At the same point the SPX went from 1027 to 1056, but they were unable to sustain. They initially started pulling back in an orderly fashion, but when that broke they stair-stepped lower for the next few hours, then spiked to new multi-year lows, reaching under 1340 on the Nasdaq 100 and just under 1008 on the S&P 500. With about 70 minutes to go they turned around sharply and rallied back up to the close in a very sharp,short-covering rally. The NDX exploded from 1339 to 1420, about an 80-point run. The S&P in the same time went from 1007 to 1064, a 57-point run, and closed near there.

Net on the day, the Dow, which had dipped down to 9525 and ran back over 10,000, closed at 9955, down 370. The S&P 500 was down 42.34, near 1057, and the Nasdaq 100 fell 59.56 to 1411 and change. The Philadelphia Semiconductor Index (SOXX) was down nearly 10, but that was 13 points off its earlier multi-year low.

Advance-declines were climactic with 3000 down and 236 up on New York and a little bit better on Nasdaq, at about 6 to 1 negative, with 2576 and 471 up. Most of the gains were stocks that turned positive in the last hour. Up/down volume was 1.8 billion down and about 125 million up, about a 15 to 1 ratio on New York on total volume a little over 1.9 billion. Nasdaq traded more than 3 3/4 billion, with 3.1 billion down and 170 million up, a negative ratio of about 8 1/2 to 1.

TheTechTrader.com board as you can imagine was extremely volatile and sharply lower, but many stocks came way off their lows. Leading on the upside was low-priced Dendreon (DNDN) on positive drug news, exploding from 4 1/4, reaching as high as 10 early in the morning. It pulled back at the end of the day to 6.93, up 1.73 on 35.7 million shares.

Positive news on AgFeed Industries (FEED) closed it at 6.26, and 59 cents, and Emergent BioSolutions (EBS), one of last week's Charts of the Week, closed at 13.50, up 91 cents after reaching down to 11.22 in the morning, so a big reversal there. Apple (AAPL) had a very nice day today, closing at 98.14, up 1.07, after being down as much as 10 points earlier in the day.

The SDS as you can imagine was sharply higher, although way off its highs, closing up 7.06 at 84.17, but had a 91.29 high. The QID was up 5.50 today at 68.55, but reached as high as 74.37, giving back about half its gains.

The DUG on another sharp drop in oil closed at 48.80, up 3.64, reaching 55.38 today. We originally highlighted it in the mid-20s just a couple months ago.

On the downside, loss leaders were DryShips (DRYS), down 4.25 at 27.25, although that was nearly 4 off its low.

Airlines got hurt today despite the sharp drop in oil, with Continental (CAL) at 13.45, down 1.74, although that was 1.75 off its low. United (UAUA) at 6.70 was down 1.41 on 20 million shares.

Stepping back and reviewing the hourly chart patterns the indices had what looks like a significant v-bottom and at least a potential short-term low, as historical technical indicators in the VIX and VXN and many other technical indicators & oscillators were at levels we haven't seen in many years. With those indicators at multi-year levels indicating a severely oversold market, it was no surprise we had a late rally. Let's see if we can get a follow-through tomorrow.

Published on  Tue, Oct 7 2008, 06:48 GMT