The day started on a sour note and finished the same way. The midday check of the action discussed the opening plunge and midday malaise. The afternoon sideways-to-lower grind remained in place until the final hour when selling pressure once again kicked in to high gear. The Dow Jones Industrial Average (DJIA) lost over 200 points in the final hour and ended with loss of nearly 680 points. However, on a percentage basis, it was actually the strongest broad market index as it "only" dropped 7.7%. The Russell 2000 (RUT) was the weakest with a loss approaching 12%.

As you might expect, the sector view is a sea of selling. The iShares Treasury Bond (TLT) remained the only advancer on my list. The rest of the pack was lower with losses starting at 5%. A number of groups posted double-digit declines with the Regional Bank HOLDRS (RKH) and Broker/Dealer Index (XBD) the hardest hit.

When I checked on the action earlier, I discussed the daily charts of the broad market indices. With the updated charts below, we see that the S&P 500 (SPX), Nasdaq Composite (COMP), and Russell 2000 (RUT) are showing more aggressive rejections at their October lows. That leaves the lows from November 20 and 21 as the critical points to keep in mind.

A classic downtrend consists of breakdowns through support, followed by retests of the former support as resistance. What we have now is a breakdown through the October lows, a retest of those lows as resistance and signs of rejection. A break below the November lows would continue the downtrend. Each of these tests gives us a chance to gauge how strong the selling pressure and buying demand is. So far, there has been little sign of sustained buying but it is import to keep watching for that.

And that is where I will pick up in the morning. Have a nice evening...

Chart Courtesy of Thomson Financial

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Charts Courtesy of Thomson Financial