October 28, 2009 Stock Market Recap

It was a bloodbath today, especially in small caps and Nasdaq stocks. Midday I was surprised at how many stocks were popping up on my scanner which were down between 4 and 9%. There was a lot of technical damage done as many stocks and indices broke their 50-day moving averages. (T2108 plunged all the way down to 25 today.) Volume surged across the board and every sector was down on the day. We're also starting to see October lows get broken. The Russell 2000 did just that today and in doing so confirmed its double-top. It's fallen a long way, 9%, in a short amount of time so I wouldn't expect much more downside without at least some sideways movement first.

I won't be surprised to see some snap-back on the Nasdaq too but look out for the 50-day moving average turning to resistance.

On a percentage basis the S&P is twice as far away from its October low as the Nasdaq. So one could argue that it has room to play catch up but I'd be careful trying to chase it here.

Here's part of tonight's Worden report, which sums things up nicely:

Oversold...But

Trading stats have careened to extremely negative levels--indicating, paradoxically, that the market is either short-term oversold or at least very likely within a day of it. I think it's quite normal for a market to bounce off of a significant support level for a short time, while getting ready to take a walloping dive. The market has probably built up hefty oversold pressures, but not enough to win the battle of the October low. Before this skirmish is over, I strongly suspect the October low will have been shattered. But for the immediate period ahead, a lot of shorts could be bludgeoned.

Why do I think we're into oversold territory? To a great extent I'm going by the Dominant PV Relationship, which is a big-time PDVU (price down, volume up), consisting of a whopping 1780 stocks. That smacks of panic selling, and panic-anything seldom pays off.

But I believe the trading stats will carry the battle, and they are very negative. All Eight Important Averages were down today, averaging a jumbo -2.65%. Nothing was down less than one percent.

All 16 Breadth Groupings were Super-Decisively Negative.

More downgrades...