The major market averages were mixed going into the close of today's trading. Blue chip issues in the Dow Jones Industrial Average ($INDU) were lower, while technology issues in the Nasdaq-100 (NDX.X) were higher. Meanwhile, the broader market was mostly lower as measured by the fractional weakness in the S&P 500 (SPX.X).
The $INDU is trading near a retracement level that I have pegged at the 10,100 level. The bracket I'm using is anchored at last May's high and September's low. This particular bracket worked especially well last fall and into January. The bracket also came pretty close to pegging the $INDU's recent high near the 10,700 level. Earlier, the $INDU traded below the 10,100 mark, but has since rebounded back above that level. Clearly the weekly trend is descending, and I would expect a close below the 10,100 support level to open the way to further downside.
INDU - Weekly View
The NDX is trading poorly versus the $INDU, at least over the last several weeks. But the NDX, too, is trading near a key retracement level again in today's session. The bracket I'm using for the NDX is anchored at the September low to the December high. In the NDX's case, the average has been bouncing along its 61.8 percent retracement level of that bracket, which sits around the 1335 level. Today's low in the NDX was set at 1336.
NDX - At Retracement
There may be a short-term rotation taking place, in which some of the downside risk in the NDX is shifting to the $INDU. Aside from the individual stories today (i.e. General Electric (NYSE:GE) and Citigroup (NYSE:C)) the shift of risk could explain the divergence between the NDX and $INDU. It's also possible that short-term selling has exhausted in the NDX, where no more sellers are looking to bail out at market. Once that supply eases, stocks can move up fairly easy. I believe that's what's taking place today. Just how long it last remains to be seen.