A stunning reversal today, and the third straight day that a pre-market futures ramp has failed. Will it be the knockout blow for the rally? Except for the internals – which were very strong today – the picture appears pretty negative here. You don’t have to be a technician to call today’s action ugly. The Dow and S&P (first two charts below) formed bearish gravestone dojis, and the Nasdaq and Nasdaq 100 (third and fourth charts) put in a combination similar to their December tops. Also, notice the subtle negative divergence in the charts – the Dow and the Nasdaq 100 did not clear their March highs when the S&P and Nasdaq did. That kind of divergence has marked some major highs in the Nasdaq the last few years. To correct those negative divergences, the Dow must take out 8522 and the Nasdaq 100 1100. To the downside, 8200 on the Dow, 870 on the S&P, and 1368-1375 and 1360 on the Nasdaq are support. At this point, victory in the Iraq war may be priced in, and traders may be turning their focus to the weakening domestic picture.
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