Today was another one of those extreme days that Worden loves so much. (I can’t wait for tonight’s Worden Report.) Breadth was very weak and volume surged across the board. Rising interest rates were the culprit today and just like on May 24th, the rate-sensitive utilities sector took it on the chin. That May breakdown setup a great short entry for those who were watching (I wasn’t :-( ). The break of the 50-day moving average followed by a relatively weak retest are a classic setup which William O’Neil highlights in his book on short selling.

This morning I was wrong about the Nasdaq opening under 2,575 but that area still proved important to watch. Buyers stepped in around there right from jump. They put up a good fight for about 90 minutes but once 2575 broke selling really intensified. The intraday chart shows that breakdown as well as how Bill Gross helped to squash the bounce attempt with his well-timed bearish call on bonds. (It’s worth noting that the S&P had recovered above the psychologically 1500 level just before the late day selling kicked in.)

The daily Nasdaq chart shows that it broke its March trendline today and that it’s getting close to wiping out all of May’s gains.

The S&P tagged its lower Bollinger Band today for the first time since early March. I’m looking for a test of the 50-day moving average in the near future.

The Russell broke its March trendline and tagged its 50 DMA today. I see 810 and then 800 as the next support levels.

Trend Table

More downgrades today with 10 DMA breaks and a 50 touch.

Trend Nasdaq S&P 500 Russell 2000
Primary Up Up Up
Intermediate Up Up Lat(-)
Short-term Down(-) Down Down(-)

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

Edit: The Worden Report is out. It’s not as dramatic as I thought it might be but it’s still worth a read. Here’s an excerpt (emphasis is mine):

Yesterday was a bad day. Today was far, far worse. Every one of the Important Averages was down more than one percent. In fact, only one was down less than 1.5% — namely, the Dow, which was down 1.48%. All of the breadth groupings were overwhelmed in a deluge of declines. As an example, the Dow had zero advances. Only 47 Russell-3000 stocks rose at least half a point, while 1304 fell over half a point.

The SP-500 is the weakest of the Majors. It was down 1.76% today. As of yesterday, it is no longer trading in new-high territory. It’s well below the 2000 closing high. The Dow is at least still in new high territory. It took out the 2000 high (11,722.98) last year (I think it was October). As I’m sure most of you remember, the Nasdaq Brothers have never come close to all-time highs in this bull market.

The leading Price-Volume relationship in the Russell-3000 was Price-Down with Volume-UP (1725 stocks). Second was Price-Down with Volume-Down (874 of them). In total, only 242 stocks rose.

There’s really only one practical question you can ask at a juncture like this. Could the market tumble this fast with volume increasing at this pace without being oversold? Yes, it could. A market can never be so oversold that it can’t become more oversold. But common sense tells us that we are probably not too far from an oversold bounce. But what good does knowing that do you? Are you really thinking of plunging into a conflagration like this? Smart investors spend most of the time waiting.

That last paragraph reminds me of something I saw today that disturbed me. On days like today I always get a kick out of looking at my blog’s referral logs to see what searches are bringing people to my site. This afternoon there were many people landing here searching for a list of inverse ETFs and for how to short sell. I can imagine many folks jumping on the bear bandwagon tomorrow and stepping right into a snapback rally. I’d be much more comfortable initiating shorts after that bounce comes. Hopefully those ’searchers’ won’t get chopped up with their new found bear ETFs and short selling knowledge.