Asian markets have slumped severely in overnight trading. The Nikkei 225 dropped more than three percent and is now approaching the 12000 target level which I have discussed on previous occasions. The close at 12433 is the lowest in two and one half years.

The technical pattern on this index has been remarkably predictable since last October where every effort to break above the descending 50-day EMA met with rejection and a quick retreat.

A reason cited overnight for the precipitous drop of the index was the fall of the US dollar below the 100 level against the yen. One of those nasty consequences of chairman Bernanke's cranking up the printing press.



Even more disturbing was the drop in the Hang Seng index (^HSI) which fell back almost five percent in trading today in Asia. As the chart reveals the descending wedge looks ready to give way and we will have to see whether the safety net level of the August low arrests the decline.



The S&P 500 struggled during yesterday's session in an attempt to put together another positive session in the wake of Tuesday's rally. At the close the index failed to hold on to intraday gains, encountered resistance at the 20-day EMA level and closed with almost a one percent decline.

As mentioned yesterday, the 1370 level on the upside will be a critical hurdle as it coincides with the steeply descending 50-day EMA and beyond that 1380 would almost certainly be a level where a barrage of selling would arise.

European markets are also sliding as I am writing this, with the DAX barely hanging on at the January low. This does not bode well for a good beginning when the US markets open in a few hours.



Integrated Device Technology (IDT) collapsed out of its descending wedge pattern yesterday. Many charts have very similar patterns with similar potentials for large falls.



The chart for Nordstrom (JWN) shows an evolving bearish pullback pattern with overhead resistance from the 20- and 50-day EMA's.



Pulte Homes (PHM) faces obvious stiff resistance from the intersection of two moving averages above yesterday's intraday high.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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