Yesterday, stocks fell for the second day, as the focus remained on the
economic and financial problems of Europe. Stocks opened higher, despite a
downgrade of Italy's debt, and held the gains until an hour before the close
when "the troika" (European Central Bank, the European Commission and the
International Monetary Fund) failed to reach an agreement on a bailout plan for
Greece. Volume was light with just 925 million shares traded on the NYSE with
decliners exceeding advancers on the Big Board by 1.5-to-1. The Nasdaq was the
only major index to close decisively lower, as it gave back recent gains losing
0.86% with decliners ahead by 2.6-to-1. Even though the Nasdaq's pullback was
anticipated (see Monday's Daily Market Outlook ), selling in technology stocks
was heavier than usual. Netflix (NASDAQ: NFLX ), off $13.72 on high volume,
accounted for some of the sector's woes. But throughout the session, there was
talk of a generally expected failure of the sector to live up to expectations
and fear that Oracle (NASDAQ: ORCL ), which was scheduled to report earnings
after the close, would miss analysts' estimates. It turned out that ORCL beat
estimates and upped estimates for the current quarter, and the stock rose 3% in
after-hours trading. But the Nasdaq failed to hold above its 50-day moving
average, turned away from the high of Aug. 31, and picked up a stochastic sell
signal three very negative responses to important chart features all in one
day. The market has become extremely technical meaning that traders are focused
on every technical feature of the charts. Yesterday was a fine example of an
unusually heightened awareness of technical analysis as both The Wall Street
Journal and CNBC commented on the failure of the S&P 500 to close above 1,220,
its 50-day moving average. The S&P 500 closed lower by just 2 points. But
turning away from a key resistance line like the 50-day moving average signals
that there are probably not enough committed buyers to push the S&P 500 into the
major zone of resistance, which is just above the neckline at 1,262.
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