It seems like all this month every attempted rally has been met by selling. That was the case again today. I think Briefing.com summed up the current environment well in a note today:
15:42 Floor Talk
Seeing late fade in tech with SOX leading the way down. While a number of Semi names remain firmly in positive territory (e.g., FCS +11.7%, CY +8.8%, PMCS +7.3%), there remains a lack of conviction in the group. Trading desks point to a lack of institutional order flow in semis today, and attributing much of the early strength to momentum players trading the bounce. This is similar to the action noted in last night’s Swing Trader: “From a Swing Trading perspective, stocks appear short-term oversold and due for a bounce, but as I’ve said in the past, the “fast” money is being made on the short side on weak rallies. Today’s action is a great example of that as traders who bought on this morning’s weakness took their profits and ran for the exits after lunch. That’s a sign that buyers have no commitment to this market.”
You know I agree that we’re due for a bounce but I always keep in mind that oversold can become more oversold. I see a couple of possibilities in the NASDAQ chart right now. A retest of the May lows is certainly possible but I also see a potential inverse head & shoulders pattern forming. It also looks like 1900 is an important level and will be tested real soon.
