Nasdaq Streak Ends on a Sell Off Day

On Wednesday, the streak of 8 consecutive up days for the Nasdaq came to end as the market sold off on higher than average volume. Yesterday, the Nasdaq closed +26 points above the January high of 4,246. Today, it closed -9 points below the prior high. When an index reverses off of a new high, it raises some caution flags. However, as I mentioned previously, steep and deep V-type patterns often lose strength when rebounding to old highs

The market internals tell us that the BIGs were sellers today. The Nasdaq fell -34 points (-0.53%) and the S&P lost -12 points (-0.55%). Declining stocks beat advancing stocks by a ratio of 1.6 to 1. Down volume surpassed up volume by 2.3 to 1. Both indices closed below Tuesday's lows on above average volume. The S&P had rejection day, making a higher high, then closing below the previous day's low. 

It's not time to worry, however, since some profit taking at a prior swing high is common. The Nasdaq is still above its 10 SMA (4,195) by 42 points. The 10 SMA last held support at 4,170. So these are two support levels to watch going forward.

Some economic news may have spooked investors. The February Homebuilder's Confidence report has its largest ever drop, and Fed minutes indicated the bond-buying program would continued to be tapered unless there was a significant economic downturn.