We have been expecting a roll-over because the market had pulled away from resistance, the news was soft, and the pattern setting up is a head-and-shoulders. Today’s news was positive, but not very. The market reacted negatively immediately and the Dow fell 168 before recovering. With commentary on a “double dip” in housing and banks coming under more pressure, we don’t see a reason for the market to turn up. Semi’s, oil services, and brokers, all fliers recently, led the way down.

 Thursday was a broad sell-off that emphasized small caps and was not reflected in the Dow, which lost .9%. The SPY lost 1.3%, COMPQ 1.7%, and IWM lost 2.49%.  In the sectors, oil services and semiconductors lost almost 3.5%.

IWM was one of the weakest funds. Since it contains 2000 stocks, it is signalling a broad market weakness. The technical pattern is continuing to fill out a head-and-shoulders, and is probably going to bounce somewhere above the loose stop position, which has strong resistance. We are concerned about volatility and the modest recovery later in the day. There is no scheduled news on Friday, so we expect drift.

For our weekly Letter, go to www.etfdiscipline.com

Regards,

Paul Accampo