The descending triangle we were seeing in the largest and narrowest market indexes as of Monday night, as discussed in my video report that evening, came to ugly fruition yesterday. The market gapped down sharply at the open, sending both the 30-stock Dow Jones Industrials and the NASDAQ 100 Index below their 200-dmas. As the Dow streaked over 500 points lower, visions of a 1,000-point sell-off perhaps danced in investors’ heads.
But the QE market does not go away that easily. After breaking below the prior October lows, the Dow, the S&P 500, and the NASDAQ Composite all turned and rallied, triggering an intraday undercut & rally move by these three major indexes. That sent late shorts scurrying for cover, and the Dow pushed all the way back near the unchanged line before losing traction and sliding to a close of down -125.98, or about ½ of a percent.
Investors were perhaps set for a continuation of yesterday’s U&R action this morning, but the market remained incoherent, with the Dow and the NASDAQ 100 breaking below their 200-dmas early in the day. The Dow eventually broke below yesterday’s lows on an ugly outside reversal to the downside on much higher volume. No magical U&R levitations today, and this is an interesting divergence from similar pullbacks in this market over the past couple of years.
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