Today was the third consecutive negative day to start the year, and it looks more like a consolidation within a downleg. The indices have now had two distinct downlegs with two consolidations, this being the second. Today on at least 2-3 occasions the market attempted to rally back out and could not get above resistance at 1580 on the Nasdaq 100 and 1192 1/2 on the S&P 500. They tried that in the morning, came back down and retested the lows. They were successful on that retest and then bounced right up to the morning highs but could not get through. In the afternoon when that occurred, the markets rolled down and closed at the lows from the session.

The Dow was down around 33, closing under 10,600. The S&P 500 was down 4.31, the NDX down 8, with the Composite down 16 2/3 and the SOX down 6, or about 1 1/2 percent.

It was a negative day across the Street, confirmed by the technicals. Advance-declines were 23 to 9 negative on New York 22 to 9 on Nasdaq. Up/down volume was a little less than 3 to 2 negative on New York on a little less than 1.4 billion traded. Nasdaq traded about 2.14 billion with about 1 1/2 billion of it to the downside, or 2 1/2 to 1 negative.

So, prices and technicals were negative, confirming the downtrend.

Thetechtrader.com trading board was mixed ,but generally negative. The downside leader was WGAT giving back a huge chunk of its recent gains, down 1.54 on more than 5 million shares traded. On the plus side recent Chart of the Week CRYP snapped back 88 cents, and ISON ran up 77 cents on very heavy volume.

Stepping back and reviewing the overall patterns, yesterday's definite break of Nasdaq support and topping type patterns failed to generate much rebound today, and the indices are very vulnerable to lower prices. It appears that if the market opens lower tomorrow, and it very well could do so because of the position of the indices, we may have a third and final leg down before we see a more substantial rally.

But the indices after today's negative technicals are going to be extremely oversold short-term and I do expect a bounce at some point tomorrow but probably after some early morning weakness.

Good trading!

Harry

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.