Markets for the second consecutive week opened up on a very poor note. Last Monday saw the Nasdaq slump 2.4% slashing its 50 day SMA on better then average daily volume. Today the index fell 1% at the open battled back very briefly into positive territory, then fell again. To its credit it did find a mild rally into the close to slice losses more than half. That being said last Mondays move started a bearish flag pattern and the longer the benchmark trades underneath its 50 day SMA the worse off it is. Today marked the 8th consecutive session that the Nasdaq CLOSED at or in the lower half of its daily range. A move below the flag pattern at 4950 would have a measured move 200 handles lower which would put it just below its 200 day SMA. Below is the chart and an explanation of what I feel the technical situation is for the leading index. Talking about leaders, some of the best know stocks in their respective groups are breaking down and that is a very worrisome development. Looking at charts like CNC in the healthcare group which is now off more than 16% from recent all time highs, with the vast majority of those losses coming the last 2 sessions. Last Thursday recorded an ugly bearish engulfing candle. WHR, a former best of breed name, is in bear market mode lower by 22% from its own all time highs made on 2/4. One bright spot today were the exchange plays. Keep an eye on CBOE which demonstrated excellent relative strength today back above the round 60 handle and looks ready to start constructing the right side of a cup base. Potential trigger would be 68.10.
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