Equities arrested their decline yesterday but the bulls were unable to hold on to the early gains and the market closed with a plethora of long upper tails to the candlestick formations. The focus chart today is the Nasdaq 100 (^NDX) which has several interesting technical characteristics.

The first point to make is that this index, unlike the S&P 500, did actually make it back to a 62% retracement of the whole swing move from the October 7 peak to the March 8 low.

In that confusing move that took place on June 5, the day before the employment data was released last Friday, the index actually closed at 2055 which was about 30 points above the 61.8% retracement. Since then it has come down in a hurry and, although the index closed yesterday just above the 200-day EMA level at 1924, there would seem to be an imminent test of 1885 or thereabouts which is the 38% retracement level.

When major inflection points are triggered and sentiment shifts as it now appears to have done, one can expect the bears to wait opportunistically for new entry opportunities as rallies try to hit upside targets and stall.

For the moment I am not seeking out too many trades in individual US equities and I am finding more attractive opportunities in the exchange traded sector funds, especially the overseas funds.



In overnight trading the Hang Seng index (^HSI) lost another 1.8% and the Shanghai index dropped even more percentage wise and is now right on the 200-week EMA that I discussed yesterday.



Yesterday revealed more evidence of asset class switching on a large scale as Treasuries sold off again across the board. A lot of traders have been reversing yield curve bets that have gone awry as the market shifts back and forth on the recession/inflation spectrum. The ten-year note yield is moving up towards 4.25% where a pause is likely but if we keep heading north on yields at this stage we would have yet another negative for equities.



The movements in gold are following the logic that I have been anticipating and as I suggested earlier this week the $830/840 target on the spot price, which would seem to coincide with the 160 level on the gold mining index (^GOX), could bring some of the fast money into the sector.



Foundry Networks (FDRY) has a bearish pullback pattern.



Lockheed Martin (LMT) looks vulnerable with notable overhead resistance.



Southwest Airlines (LUV) is not a stock that I would consider from a fundamental perspective but the technical setup looks relatively favorable for a long play in the short term. But, as with all suggestions, be sure to take losses quickly and gracefully if the sector gets pummeled again by surges in the crude market.



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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