| Techs In Correction |
| Written by ForexMomentum |
| Wednesday, 13 January 2010 |
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Earnings season started with a disappointment from AA whose stock price took an 11% dive today. In sympathy to the stock, the whole materials sector pulled back but that wasn't what stood out in today's session. While AA's earnings miss was the catalyst for the overall market decline, the technology stocks, especially the semiconductors, saw significant profit taking as SOX dropped more than 3% to fall below its 20 day simple moving average. Despite some late day recovery, the NASDAQ still closed down 30.10 points (-1.30%) at 2282.31. The DJIA fared better and was way off its intraday low at the close. The blue chip index limited its loss to 26.73 points (-0.34%) to finish at 10627.26 while the S&P 500 gave up 10.76 points (-0.94%) to 1136.22.
Although the loss in the DJIA as rather small, the overall market did much worse. Breadth was decisively negative while volume expanded some from yesterday. Decliners outpaced advancers by a 21 to 8 ratio on the NYSE and by a 19 to 7 ratio on the NASDAQ. About 80% of the volume was on the downside on the NYSE while nearly three quarters of the volume was down on the NASDAQ. Crude oil retreated about 2% to settle at $80.79 per barrel as traders feared that China's move to tighten monetary policy would lower crude demand. Today's pullback turned short term momentum bearish among all the major indexes. However, there is no clear sign that the New Year's rally is over. There wasn't much selling pressure as the pullback was limited while volume stayed rather low. It appears that many investors are holding on to their long positions while short sellers are still afraid. The lack of volume on both up and down days suggests confusion among the traders in term of market direction. Technically speaking, the major indexes are still overbought and underperformance of the tech stocks doesn't bode well for the overall market. (Of course, INTC earnings due out on Thursday could change the whole landscape.) Among other sectors, energy is facing a correction as overbought crude oil could pull back from above $80 per barrel to the area between $72-$75 per barrel. Comments (0) |
