The markets had some interesting volatility to end the week on options expiration day. They opened with a sharp gap lower, bounced and then made lower lows by mid-day and new lows for the entire pullback, reaching an extremely oversold condition on a short-term basis. By mid-day they started to turn and triggered a strong rally in early afternoon, which extended to new highs for the session with about an hour an a half to go. They then pulled back down and gave back about 50% of the rally , retested the intraday moving averages, but held and bounced back into the close.

Net on the day, it was a mixed close, with the Dow down 100, but still about 125 off its low. The S&P 500 was down a little less than 9 points, closing 16 points off its low. The Nasdaq 100 actually was up almost 5 at 1172.71, having jumped about 20 points off its low. The Philadelphia Semiconductor Index (SOXX) was also up today by 1.19, and closed 5 points off its low.

So we had some afternoon reversals on options expiration day off of a short-term oversold condition. Monday and Tuesday will be very important for the trend, as we are at a cluster of Fib levels and cycle lows in this timeframe. So I expected the market to rally, and we certainly got one in the afternoon, but it will be important to see if we get a follow-through next week.

The technicals, however, ended very negative, with advance-declines about 3 to 1 negative on New York and a little worse than 2 to 1 negative on Nasdaq. Up/down volume was 3 to 1negative on New York on total volume of 2.1 billion. Nasdaq traded 2.1 billion and had a 3 to 2 positive volume ratio. So Nasdaq outperformed the blue chips today.

TheTechTrader.com board had several point-plus gainers and losers. On the plus side, the Direxion Large Cap Bear 3X Shares (BGZ) was up 2.90 to 82.40, and Direxion Financial Bear 3x Shares (FAZ) up 2.30 to 72.50, although that was 14 points off its high earlier in the session when it was up more than 16.

Amazon (AMZN) had a strong session, up 1.91 to 63.86, and the agriculture stocks also had a positive session, with Potash (POT) up 1.52, Mosaic (MOS) up 79 cents, CF Holdings (CF) up 1.18, and Agrium (AGU) up 79 cents.

DG FastChannel (DGIT) was up 31 cents, Palm (PALM) 21 cents, DryShips (DRYS) 20 cents, and Apple (AAPL) was up 52 cents.

On the downside, the SRS UltraShort Real Estate got crushed after rallying earlier today, from a high 88.50 to a low of 72.28, down 10.38 on 25 million shares. The iShares MSCI Brazil Index ETF (EWZ) was down 1.40, and Ultra Oil & Gas ProShares (DIG) down 1.15.

SunPower (SPWR) lost 1.21, Sequenom (SQNM) 1.27, and Wells Fargo (WFC) closed down 1.10 to 10.91. However,that was 2.10 off its low, as most banks snapped back sharply in the afternoon.

Stepping back and reviewing the hourly chart patterns, the indices were due for a rally in this timeframe and were oversold enough to trigger that. We certainly got one, but didn't hold it all with an afternoon pullback, although managed to close mixed on the day.

We'll see if an important short-term low was put in after we check on the results oearly next week.

Good trading!

Harry

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