The Volume Is Light; The Indices Are Heavy

Despite
yesterday’s selloff,
which took place on light volume, it still
looms large as a bad sign as we move into next week.
The indices, as I had been mentioning, were feeling very heavy as of
late, unable to penetrate upside resistance, and are now poised to re-test June
support.

The Nasdaq is now trading below
its 50% retracement of the April-May high/low of 1760. Now 1676 is the next
logical support level. A break of that
would set the stage for retesting contract lows set back in April.
The S&Ps are within range of 1200, but still have not completely
broken support at 1220.

Even the ever-resilient
semiconductor stocks are starting to look a bit vulnerable, especially after
AMD’s
(
AMD |
Quote |
Chart |
News |
PowerRating)
profit warning. Stocks
like
(
MU |
Quote |
Chart |
News |
PowerRating)
,
(
TXN |
Quote |
Chart |
News |
PowerRating)
and
(
AMAT |
Quote |
Chart |
News |
PowerRating)
are all trading below their 50-day
averages and are rolling over on both 15-minute and hourly charts. 


(
IBM |
Quote |
Chart |
News |
PowerRating)
, the "rock"
of the tech sector is starting to show signs of deterioration as it is now just
below its 50-day average of 112.93. At
these levels, IBM is very sensitive to any bad news and is worth watching
closely as it has a very good intraday range making it a good short-term trading
vehicle. IBM’s 200-day moving average
is 108.53.

This decline in the indices
should be a good catalyst for trading next week as traders and PMs come back
from holiday, combined with the beginning of earnings season. 
The opening looks like it will offer some good opportunities, the
afternoon remains a mystery, although I do not expect much, rather I will be
spending the weekend getting ready for next week.

Have a great weekend.

Dave

davef@tradingmarkets.com