The indices had a very negative start to the week and closed at the lows for the day going away. 

The day started out, however, with a slight move higher, then a pullback that held support, and then a very sharp, brief rally that tested resistance and failed.  When they backed off in the morning, they then meandered in a very narrow coil-like action on the NDX and tried another rally on the S&P 500 that failed at the morning highs.  They rolled over and sold off steadily and sharply the rest of the session.

The Dow was down 39, the S&P 500 down 7.40, but the Nasdaq 100, fed by the SOX Semiconductor index, was down 24.32, with the SOX off 11.40.  A very steep sell-off.

The technicals confirmed that.  They were 24 to 9 negative on New York and 21 to 9 ½ on Nasdaq.  Up/down volume was just as bad, by about 2 ½ to 1 negative on New York on a total of more than 1.6 billion traded.  Nasdaq traded about 1 ¾ billion, with about 1.4 billion of it to the downside, about a 4 to 1 negative ratio.

TheTechTrader.com board was active with a lot of fractional changes, but there were some outstanding stocks on the plus side.  One of our model portfolio members, Neoware Systems (NWRE), exploded today for 3 points on 2 ½ million shares, outstanding relative strength action in a negative market today. 

Hauppauge Digital (HAUP) gained 1.51, a big percentage gainer, on more than 7 ½ million shares, on news of a new software release for mobile devices.

Other stocks of note, PW Eagle (PWEI) snapped back 72 cents, but most other stocks were fractionally mixed that were up today.

On the downside, Rediff.com India (REDF), although stronger earlier in the morning, dropped nearly 3 points from its high and lost 1.90 on the session on more than ¾ million.  Vertex Pharmaceuticals (VRTX) fell 60 cents, Sierra Wireless (SWIR) was down 55 cents, Energy Conversion Devices (ENER) lost 52 cents but 1.67 off its high, and Evergreen Solar (ESLR) dropped 35 cents in the same sector.  Dynamic Materials Corp. (BOOM) gave back 85 cents, and Convera (CNVR) fell 56 cents.  Broadcom (BRCM) lost 2 points and led the semiconductor group down, one of the reasons why Nasdaq was so steeply oversold today.

Stepping back and reviewing the hourly chart patterns, a four-week head-and-shoulders top pattern on the Nasdaq 100 was completed today when the neckline at around 1670 was broken and taken out with ease late in the session.

The S&P 500 has yet to confirm and would need to drop an initial 10 points from here to take out the 1250 key support zone at this point. But with Nasdaq leading the way down we may see lower prices.  The market does have an opportunity to stem the tide right here and turn it around, but right now things are looking more negative than they had, and the negative start to this week does not augur well for the year-end rally.

Good trading!

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.