Good Morning, Traders. Negative day for the markets as we logged a confirmed distribution day on the last day of trade for February, 2006. Weaker than expected Consumer Confidence, Chicago PMI, and Existing Home Sales figures all dropped at 10am EST and sent the markets strongly lower, erasing all of Monday's gains and then some. Overall volume was stronger than the previous day when we went up which would be construed as negative and gives the market a fat "D" on its daily report card for "distribution". The Dow shed 104.14, the S&P cast off 13.46, and the Nasdaq Composite clipped off 25.79. Total turnover on the NYSE picked up by 23%, while over on the Nasdaq the figure came in 27% higher as well. Decliners led advancers on the NYSE by 1259 and by 1054 on the Nasdaq. Breadth was very negative as well, with declining volume four and half times heavier than advancing on the NYSE, and two and half to one on the Nasdaq. Generally advance decline lines worse than negative 1000 are considered quite bearish, and breadth readings worse than 2.5 to 1 negative are construed as same.

All sectors on the ShadowTrader Core Sector List closed in the red yesterday with internets getting smacked the hardest after Google (GOOG) reported the growth would slow in coming quarters. Upon the news, Google sold off over 60 points in less than 45 minutes and dragged other internet players such as EBAY, AMZN and BIDU right with it. The circled area above is the trendline break on the 2006 S&P that sparked the rally recently. Note how yesterday's weakness dropped us rigth back to the opposing side of the trendline. The backside of a trendline should hold when pierced to one side and then retracing back to the other.

Peter Reznicek is Chief Equity Strategist for ShadowTrader.net a subsidiary of thinkorswim, and a Principal of the Prana Fund, a hedge fund.  Mr. Reznicek can be reached at preznicek@shadowtrader.net.