Big drop in stocks, gold

Stocks, especially financials, got hit hard today right from the open on overnight news of European credit risk and banking liquidity. The Nasdaq 100 (QQQQ) held up relatively well for almost the entire session, and was actually up at one point, but with every rally attempt in the broader market met by waves of selling, the Nasdaq finally gave up and ended down. I had hoped Cisco would provide a catalyst for the Qs to move higher, and Cisco did make a new high at one point, even though the S&P and Dow were down sharply. You can see on the chart on the right of the Qs that they opened right on the three day pivot (yellow dot) and rallied to challenge yesterday’s high. But later in the session the Nasdaq followed the rest of the market to close lower. Cisco only lost a dozen and a half pennies, and some tech stocks such as Microchip and Sandisk were up sharply. I still think the best long play on the next signal will be the QQQQs and the best short play on the Dow and S&P. All momentum is obviously down at the moment. There wasn’t much warning as the news overnight caused a gap down in all the indexes, and momentum had been up prior to today, however as I’ve said repeatedly, the Nasdaq (Qs) is the only stock index showing an uptrend. It looks like the lows will be challenged, and if so that uptrend will be suspect. Yesterday the close was almost to the penny on the 50% retracement level on the Qs, as I pointed out in yesterday’s chart and commentary. It was a good profit taking point, but there wasn’t much reason to enter a short there with momentum still pointing up.

Gold fell sharply along with stocks. So much for a safe haven in gold when there is a potential monetary problem. Gold signals have been mixed in the last push up, and as of today’s close all trends and momentum are pointing down.

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