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Capitulation Low...Not In Yet

 May 15, 2012 08:11 PM

(By Harry Boxer) The stock market indices suffered losses with an afternoon slide that broke support, and I have to say, despite some oversold readings, we're not as low as we may eventually get. The intensity of the sell-off wasn't quite as low as we want to see before we talk about a capitulation low.

The day started out, with a little bit of a move up, and then they moved back to retest mid-morning. From there, they made higher highs by the end of the day with the Nasdaq 100 taking out even yesterday's highs. However, the S&P 500 didn't confirm. I took note of this during the training session, and sure enough, a 5-wave sell-off ensued, with the 5th waves intraday into the close being the worst. They did bounce around during the last 40 minutes, or so, but were unable to make any progress. This kind of formed late bear flags.

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Net of the day, the Dow dropped 120 points off the high to close down 63.35 at 12,632.00. The S&P 500 dropped from 1345 to 1330.66, closing down 7.69, and the Nasdaq 100 dropped 37 points off its high, and closed down 9.53 to 2580.75.

Advance-declines were 2 to 1 negative on the New York Stock Exchange, and about 14 to 11 negative on Nasdaq. Up/down volume was 3 1/2 to 1 negative on New York, total volume 750 million shares. Nasdaq traded 1.75 billion, and had a 2 1/2 to 1 negative volume ratio.

It was quite a negative day on Wall Street, but not as bad as it can get, and certainly not of a capitulation nature, despite the fact that the technicals were somewhat weak. The oscillators are not going to be weak enough yet, so we're still looking for some more downside. Immediate current support at the bottom of the channel on the S&P 500 is around 1317. The NDX could easily reach down to 2565 short-term.

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TheTechTrader.com board was mixed, but mostly lower, although there were quite a few gainers on our board that were ultra-shorts. There were some individual stocks that did well, including a couple of our current swing trades. Amylin Pharmaceuticals (AMLN) jumped 1.65 to 27.30. Rackspace Hosting, Inc. (RAX) ran 1.50 to 52.91.

Other gainers of note included low-priced Tecumseh Products Company (TECUA), which gained1.31 to 4.70, or 39%. OPNET Technologies Inc. (OPNT), which we traded today, snapped back 5.24 to 27.35, or 23.7%, on 1.2 million shares.

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