Stock Market Sharp Rollover on Bernanke Economy Warning

By: Harry_Boxer

The stock market indices started the day with a big gap up, but that was it for the day in terms of the highs. They came down sharply, tested support, and did manage to hold by mid-morning and rally into early afternoon, but the S&P 500 failed to take out the 1085 intraday resistance level as the Nasdaq 100 made nominal new highs. That resulted in a sharp rollover after Ben Bernanke spoke about his concerns about the economy.

The indices then dropped sharply, with the NDX dropping from 1848 down to 1813, and the SPX dropping from 1085 down to 1065. They did bounce in the last 30-40 minutes but only in a consolidation mode, and ended up not far off the session lows, particularly on Nasdaq.

Net on the day at, the Dow was down 109.43 at 10,120.53, the S&P 500 down 13.89 at 1069.59, and the Nasdaq 100 down 23.37 at 1817.30.

Advance/declines were around 2 to 1 negative on the New York Stock Exchange, and 3 to 1 negative on Nasdaq. Up/down volume was 4 1/2 to 1 negative on New York with total volume of just under 1.2 billion. Nasdaq traded 2.25 billion, but had a nearly 6 to 1 negative ratio of declining volume over advancing volume.

Charts of the Day:

Tonight's Charts of the Day cover the short side on the premise the market may be vulnerable to a slide. Issues include some of the ultrashort ETFs and members of our Boxer Shorts list.

Reviewing our Watchboard:

TheTechTrader.com board, as a result, was mostly down today, other than the ultra-short ETFs. The lone major exception was Apple Inc. (AAPL), which after earnings gapped up sharply and ran strongly, but gave back a large chunk of that, closing 11 points off its high, still up 2.35 on the day at 254.24.

Other gainers of note: Dendreon Corp. (DNDN) advanced 73 cents at 32.56, BP Exploration plc (BP) 93 cents at 36.13, and Pactiv Corp. (PTV) 32 cents at 29.49, along with Power-One Inc. (PWER) up 22 cents at 9.45. Those were the only gainers in our stock section.

The ultra-shorts ETFs were firm. The Direxion Daily Small Cap Bear 3X Shares (TZA) was up 1.92 at 38.77, the Direxion Daily Emrg Mkts Bear 3X Shares (EDZ) up 1.11 at 40.64, the Direxion Daily Financial Bear 3X Shares (FAZ) 73 cents at 15.98, the Direxion Daily Large Cap Bear 3X Shares (BGZ) 58 cents at 16.05, and the iPath S&P 500 VIX Short-Term Futures ETN (VXX) 23 cents at 25.40.

Stepping back and reviewing the hourly chart patterns, the indices had a 3-step decline and by mid-morning were at the morning session lows. They bounced back by mid-day to recover about half of their losses, but the S&P 500 failed to breakout and confirm nominal rally highs on the NDX. So they rolled over sharply after the Bernanke speech, and closed down near the session lows with a pretty ugly pattern.

We'll see how it goes tomorrow, but today was not a good day for the bulls.

Good Trading!

Harry

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