For the second straight day the market gapped up and then went down for the rest of the session to close very poorly, although we did get a last-hour bounce off of a very steep oversold intraday condition bringing the indices off the session lows.

But net on the day the Dow was down 98.65, about 25 points off the low. The S&P 500 was down 14 points, only 3 points off the low. The Nasdaq Composite was down 44 1/4, about 7 points off the low, and the 100 was down 31.68, about 6 points off the low.

So, even though they did bounce, only a very small portion of the day's losses were re-gained during the last hour, and in the last 5 minutes they backed off even again to close at those levels.

The technicals were very negative, confirming the day. Advance-declines were 3 to 1 negative on both New York and Nasdaq. Up/down volume was very negative by nearly 5 to 1 on Nasdaq on very heavy volume of over 2.4 billion. New York volume totaled a little less than 1.7 billion. However,less than 200 million of that was to the upside in a ratio about 7 to 1 negative. So, very negative volume on New York.

TheTechTrader.com board was very active today, with most of the stocks down. There were a few outstanding up issues. We traded Intrusion (INTZ) today. That stock shot ahead by as much as 3 1/2 points at one point, but gave back nearly 2 points on heavy volume of 7 1/4 million shares on a contract from the U.S. Army.

WorldGate (WGAT) shot ahead to a new multi-year high, getting as high as 6.89 before closing at 6.35, up 17 cents on 6 1/2 million shares.

A couple other standouts today were Evergreen Solar (ESLR) up 50 cents on heavy volume, and Applied Digital (ADSX) up 22 cents today and holding well all day.

Alvarion (ALVR) came back on partnering news, up 50 cents today, but some 70 cents off the high, on 3.4 million shares.

On the downside, loss leaders were MIKR down 1.92, NTMD 1.76, WPTE down 1.32, PARL 1.39, and CRYP 1.64, along with TASR 1.29. So, some heavy losses today in some of the recent momentum high-flier stocks.

Stepping back and reviewing the overall patterns, the damage that's been done since the year began has been severe and important. The Nasdaq 100 appears to have completed a one-month topping phase by breaking down through its rising bottoms line and prior support lows.

The S&P has not done so yet, although the drop in the last couple days has taken it down around 35 points and taken out key initial support in the 1195-1200 zone.

Despite the fact that the indices are oversold, momentum could still carry us a little bit lower before a more significant rally sets in.

But the negative divergences that we saw at the end of last year have finally caused the indices to pay the price and roll over in the last two days, and this could be the start of something big.

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.