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Technical Trader Closing Brief

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Dow Reverses 860 Points Higher in 40 Minutes, but Indices Still Close Slightly Lower

Mon, Oct 13 2008, 06:39 GMT
by Harry Boxer

The Technical Trader

Another historical day and probably one of the most volatile days I've ever seen, including a late historical rally as well.

The day started out with a huge gap down. They dropped precipitously in the first 10 min to reach 1200 on the Nasdaq 100 and 840 on the S&P 500. They then turned around very sharply and rallied in very sharp straight line, from 1200 to more than 1300 on the Nasdaq 100 inside of a half hour. At the same time the S&P 500 went from 840 to about 915, and then they proceeded to pull back in a steady manner, but eventually accelerated lower. They did bounce mid-day, but rolled over when that rally failed to take out resistance and came down to retest the lows in a complete retest of the sharp morning snapback rally. When that held on two different occasions, the shorts started to cover, and the rally exploded, with the Dow moving up more than 860 points in about a 40-minute span, the S&P 500 went from 840 to 936, 96 points, as the Nadsaq 100 rallied from 1200 to 1317. However, in the last 20-30 minutes profit-taking set in and they pulled them back sharply to close in the red.

All the indices had actually gone positive with about 20 minutes to go, but they returned to the negative column at the closing bell. Net on the day the Dow had a range of more than 1000 points but closed down 128 on the day. The S&P 500 had a range of 96 points, but closed down 10.70 to 899.22, and the Nasdaq 100 had a range of 121 points, ending at just under 1270, down 5.30. The Philadelphia Semiconductor Index (SOXX) dropped 2.32 today to 246.11.

The technicals remained negative by 2 to 1 on advance-declines on New York, but barely negative on Nasdaq by only about 125 issues.
Up/down volume, which was extremely negative in the morning, turned around, although remained lower on the day at about 9 to 5 negative on New York on huge total volume of just under 3 billion. Nasdaq traded over 4.2 billion for a combined total of over 7 billion shares traded on both exchanges, which I believe is an all-time record. Up/down volume on Nasdaq was 25 to 16 negative.

TheTechTrader.com board was extremely volatile and all over the place. The board was led by the ProShares UltraShort Oil & Gas ETF (DUG), which soared as high as 86.50, from our high 20s recommendation in July, but it sold off sharply in the last hour, and when the market rallied it closed up 9.70 at 74.40.

Apple (AAPL) had a nice rally back from 85 to 100, closing at 96.80, up 8.06. JP Morgan (JPM) had a very strong session, with a 35 low and 42 high, closing at 41.64, up 4.96 on 110 million. Even Morgan Stanley (MS), which ended down sharply, came way off its low of 6.71, rallying back over 10 to close at 9.68, down 2.77 on 205 million.

Sigma Designs (SIGM) had a good day, up 1.24 on over 1 million shares. Energy Conversion Devices (ENER) came back from a low of 29 to a high of 39, backing off to 36 at the close, up 1.87. And Canadian Solar (CSIQ) jumped from 9.61 to 12.94, closing at 12.69, up 1.24 on 2 1/2 million shares, as the solar energy stocks snapped back.

Citibank (C), reaching as low as 12, closed at 14.11, up 1.18 on a quarter of a billion shares.

On the downside, DryShips (DRYS) lost 1.05, the USO dropped 3.19, and the EWZ Brazilian ETF lost 1.27.

Stepping back and reviewing the hourly chart patterns, the indices plunged early to test 1200 NDX and 840 SPX, and retested in the afternoon on two occasions. When they failed to go lower, they rallied very sharply, although they did back off quite sharply as well into the last 20 minutes. So an inconclusive day but certainly a sharp historical type snapback off the lows, and a promising start if this was an important bottom today. We'll know more as next week progress as to whether today was a significant turn or not. It sure looked like it , but overhead resistance near the 1340-60 zone the NDX and up around the 975-985 zone on the S&P 500 will be key tests next week.

Published on  Mon, Oct 13 2008, 06:41 GMT