Humpty Dumpty fell off the wall last week and bounced twice off the 50-dma as the NASDAQ Composite Index logged an instant 10% correction in just three days. All the king’s horses and all the king’s men assembled this morning to try and put Humpty Dumpty back together again as the indexes caromed back to the upside.
All we know for sure is that we now have a sharp, ugly break off the peak on heavy selling volume and that numerous leading stocks have broken down severely. In this market, however, down big on volume can just as easily resolve to the upside as it can to the downside, so clarification can only be gained by evaluating the situation on a stock-by-stock basis going forward. For now, the yellow caution flag is waving in our faces, to be sure.
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