A lot of technical damage today — but one potential positive. The 90.6% downside volume on the NYSE could be enough for at least a temporary washout — strong rallies can follow such “90% downside days.” Paul Desmond of Lowry’s Reports, who pioneered the study of such selling climaxes, told us he has been looking for “a day or two of intense selling … to bring this short-term correction to an end. Therefore, today’s intense selling suggests that we are nearing a bottom. But, just strong selling does not make a market bottom. The real test will be to see whether the buyers come rushing back in to grab up the bargains. I would want to see evidence of renewed demand before stepping up to the plate.”
That one hopeful sign aside, there was a lot of technical damage that needs to be corrected, particularly on the Dow (first chart below), which gave up an uptrend line that had held since April. The Dow needs to get back above 10,385, and 10,350-10,350 is the first resistance level. Support is tougher to call here, but 10,300 and 10,250 hold some promise. The Nasdaq (second chart) has important support at 2077-2082, with first support levels at 2100 and 2093. To the upside, 2115-2117 is the first big test. The S&P (third chart) has important support at 1193, and 1200-1205 is first resistance.
