It's uncanny how bearish technical developments can sometimes precede negative market-moving news events. Last Wednesday, both the Dow Jones and S&P 500 gave triple-bottom sell signals on the point-and-figure chart. Rolling action in the MACD and daily stochastics provided more reasons for the bulls to be on their toes. Throw in some stubborn overhead resistance (as outlined by Jim in this weekend's wrap) and you've got a clear picture of technical weakness in the benchmark indices. The gloomy economic data this morning provided the perfect excuse for a sell-off. The Dow's MACD is now threatening to produce a bearish crossover near the baseline. This last occurred in late May, just before the index suffered its precipitous two-month decline.
Moving into the homestretch of today's session, current sector losers include the OSX.X oil service index (-5.98%), BTK.X biotech index (-4.71%), and SOX.X semiconductor index (-4.46%). Our radar screen is displaying only one green blip, as defensive buying pushes the XAU.X gold/silver index higher by +0.87%. Market breadth is clearly negative, with down volume swamping up volume and decliners beating advancers by more than a 3-to-1 margin on the NYSE. The Dow is breaking to new intraday lows, with T (-5.89%), AXP (-6.4%), and C (-9.3%) leading the decline.
The NASDAQ has suffered a painful breakdown from Friday's Inside Day but thus far hasn't broken intermediate-term resistance in the 1265 region. Although bears seem to be keying in on the negative INTC brokerage comments today, this morning's weak economic data also seems to be weighing heavily on the tech sector. This makes sense from a fundamental perspective. Recent comments from the CEO's of INTC, SUNW, and NVLS have all indicated that the prospect for improved IT spending remains hazy at best. This situation isn't going to improve anytime soon if an economic recovery does not take hold. Technically, traders will be paying close attention to the SOX.X. A break under the multi-year low of 282 could have the NASDAQ quickly retesting critical support in the 1200 area.
In late-breaking news, KLAC announced this afternoon that the company expects Q1 to fall as much as 15%. Previous guidance had been for only a 10% reduction in orders.