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Technical Trader Closing Brief

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Overbought Market Yields to Profit−Taking

Tue, Jan 6 2009, 07:39 GMT
by Harry Boxer

The Technical Trader

The markets had a reasonable consolidation day, but ended lower on the session, due to profit-taking from a very overbought condition. Although at mid-day they did reach new rally highs, a pullback in the last couple hours pulled them back into negative territory.

The day started out with a gap down. They went lower and reached session lows early in the first half hour, rallied nicely and snapped back to retest the highs, but at that point went sideways in a multi-hour consolidation. They ended up breaking out after lunch hour and moved to the session highs, but pulled back the rest of the afternoon. Only a late last 20-30 minute snapback brought them back to pare the losses.

Net on the day the Dow was down nearly 82, the S&P 500 down 4 1/3, and the Nasdaq 100 1.18. The Philadelphia Semiconductor Index (SOXX) managed to gain 1.38 in a relatively stronger semiconductor sector.

Advance-declines were 2 to 1 positive on New York, but positive by just 245 issues on Nasdaq.
Up/down volume was about 7 to 6 positive on New York on total volume of 1.3 billion, which is lighter than normal, but an increase over recent levels. Nasdaq traded a little more than 1.7 billion and was flat on up/down volume .

TheTechTrader.com board had an exceptionally strong day today. Leading the way were the agriculture stocks. Potash (POT) at 82.62 was up 5.27. Mosaic (MOS) gained 81 cents, CF Holdings (CF) 2.97, and Agrium (AGU) 99 cents.

Multiple-point gainers included Apple (AAPL), up 3.83. The U.S. Oil Fund ETF (USO) gained 1.67, and the iShares MSCI Brazil Index ETF (EWZ) was up 1.38 to 38.08. The Ultra Oil & Gas ProShares (DIG) gained 1.14, as would be expected with crude oil increasing.

Other stocks of note, Multi Fineline Electronix (MFLX) on an upgrade in earnings and upward guidance advanced 3.40 to 15.68 on less than half a million shares. SunPower (SPWR) at 44.15 was up 3.75 in a very firm solar sector. Canadian Solar (CSIQ) advanced 65 cents to 7.04.

Sequenom (SQNM), one of our portfolio positions, jumped to 3-month highs at 26.42, up 2.84 on 2 1/4 million, and Energy Conversion Devices (ENER) gained 1.58 to 29.38. Emergent BioSolutions (EBS), a portfolio position, snapped back 2 points off its earlier low, closing up 1.17 at 26.26.

DryShips (DRYS) had a spectacular session, reaching as high as 14.44, backing off late in the afternoon to close at 13.85, still up 1.36 on nearly 35 million shares today. Aerovironment (AVAV) jumped 1.12 and hit a new all-time high today at 39.73, and Aluminum Corp. of China (ACH) snapped back over 16 to close at 16.10, up 45 cents.

Stepping back and reviewing the hourly chart patterns as indicated earlier they were down early, rallied to new rally highs by mid-afternoon, and then pulled back at the end of the day to end negatively on the session. It was not too bad a sell-off considering the overbought condition of the market.

Published on  Tue, Jan 6 2009, 07:43 GMT