GLOBAL GLOOM SETS TONE FOR LOWER MARKET HERE
JAPAN SINKS 220 POINTS... Starting in Asia, global markets had a bad day -- even before our markets opened. The Nikkei 225 Index fell over 200 points and is threatening its old low. In Europe, markets lost 2-3% with the German DAX showing the biggest loss of 3.35%. That spilled over into our markets, which are trading lower today. Another sign of stock market weakness is the sharp jump in U.S. Treasury bonds and notes.
Chart 1
BOND YIELDS FALLING... Chart 2 shows the 10-year T-note gapping down for a test of its late December low. Falling bond yields (rising bond prices) are normally associated with falling stock prices. Today's report that consumer confidence has fallen to a nine-year low is more bullish for bonds than for stocks.
Chart 2
NASDAQ FORMS ISLAND REVERSAL TOP... Last night, we showed the Nasdaq 100 failing its test of moving average resistance. So far today, the NDX is the weakest part of the market as technology stocks lead the decline. The daily chart shows the NDX gapping down today. Combined with the upside gap of five days ago, that leaves a potentially bearish "island reversal" pattern overhead. The Nasdaq Composite Index shows the same negative chart pattern.
Chart 3
CISCO FALLS... Of the biggest tech stocks in the NDX, Cisco is the most prominent today. Aside from the fact that it's the most actively-traded Nasdaq stock, it is also slipping back under its (blue) 50-day average. That would put it in striking distance of its (red) 200-day line. The daily stochastic lines (which are among our most sensitive indicators) are turning down from overbought territory over 80.
Chart 4
OTHER NASDAQ LOSERS... Although smaller in size, the next three charts show some of the day's biggest percentage losers in the Nasdaq 100. BEA Systems has been falling for three days on heavy voume and is bearing down on its 200-day average. Ericsson has broken its December low. Network Appliance is headed for a test of its recent lows.
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