The markets had what in my mind is a huge negative downside reversal today, and it came suddenly. The day started out with a surge to the upside with strong pre-market futures. The market opened strong, worked its way higher to mid-day, began to back off a little bit after lunch, but then plunged. In an hour the Nasdaq 100 was down around 50 points, the S&P 500 around 20. They tried to bounce back, did a Fibonacci retracement, failed at resistance, and went to lower lows and sharply so. Only a late snapback pulled them off the lows and recovered the indices, particularly the Dow, which closed back over 14,000, having gotten down as low as 13,950.

Net on the day, the Dow closed at 14,015, down 63 1/2, but was as high as nearly 14,200 earlier on. So it was a 250-point reversal, followed by about a 65-point bounce. The S&P 500 dropped from 1576 to 1546, and closed at 1554, down 8. The Nasdaq 100 dropped from 2194 to 2127, a 67-point drop, and bounced to 2141 at the close, down 36.

The Philadelphia Semiconductor Index (SOXX) was partially the culprit, as it was lower most of the session and led the way down, closing down 11 points today, or more than 2 percent.

The technicals confirmed the decline and reversed from the positive side to sharply negative by about 2 to 1 negative on advance-declines on New York and more than that on Nasdaq. Up/down volume was 3 to 2 negative. Total volume increased, just under 1 1/2 billion. Nasdaq traded a heavy 2 1/2 billion, and had a ratio of 4 to 1 negative.

TheTechTrader.com board, as you can imagine, was vastly negative and lower, with many point-plus losers, particularly in the Chinese sector, as Chinese stocks led the way lower today. Fortunately, we exited all of our long portfolio positions earlier this week.

BIDU got hammered from 358 down to 301, before bouncing at the close, but a 58-point reversal is nothing to sneeze at and could be signaling an important top in that sector.

Other Chinese stocks of significance on the downside: China Medical Technologies (CMED) reversed from 42 to 34 and change, closing at 37 1/2, down 2.93. China Natural Resources (CHNR) reversed from 45 to 37 and change, closing at 39, down 3.50.

e-Future Information Technology (EFUT) reversed from 26 to 21 1/2, closing near 22, down 3.08.

But there were several other high-tech losers as well. VMware (VMW) , which had been flying late, up from 29 to nearly 115 this morning in just 2 1/2 months since its IPO, dropped precipitously, dipping under 100 for a moment, closing at 102.69, down 4.35.

Sigma Designs (SIGM) took it on the chin, dropping more than 6 points from high to low, closing down 2 1/2 on the session at 53.76.

Shipping stocks also got pounded hard, with DryShips (DRYS) reversing about 11 points from its high before bouncing, still down 4.72 on the session on heavy volume. Excel Maritime (EXM) as well, in that sector, reversed from 70 1/2 to 63.80, closing at 65.13, down 2.19.

As you can see many stocks had severe downside reversals today, closing at the low end of the range for the day.

Stepping back and reviewing the hourly chart patterns, new all-time highs were hit this morning on the Dow and S&P 500 and new multi-year highs on the NDX before an extremely negative 3-wave downside reversal hit the indices. Only a late snapback prevented them from closing at the lows for the day.

But trendlines and moving averages were violated on the hourly charts, and we would be shocked if this isn't the beginning of a deeper pullback that could last 2-3 weeks, as cycle tops were due in this timeframe and we're currently in a seasonally poor period of time, as well.
 
Harry Boxer is a technical consultant to many Wall Street hedge funds and large institutional traders, and author of TheTechTrader.com, a real-time diary of his day, swing and intermediate-term trades. For more of Harry Boxer, sign up for a free 15-day trial to his Real-Time Technical Trading Diary, or sign up for a free 30-day trial to his Top Charts of the Week service.