Here Comes Another Trend-Line Breakdown

After Monday's low-volume action, a reporter on CNN's "Moneyline" actually stood there and said, "Most CEOs, Wall Street decision-makers and traders are on vacation this week." While I thoroughly enjoyed that comment and agree that Monday's volume was lackluster, I have to point out that it was no more lackluster than the four previous Mondays were. Maybe we ought to ask that reporter what the excuse was for those Mondays.

Let's get one thing straight: This is not a bull market. Bull markets have volume. Bull markets are exciting. Bull markets don't care if anyone is on vacation.

If this were a bull market, we would've gotten that summer rally everyone talked about two months ago. Even if we get a huge rally between now and Friday, I don't believe we can even see the highs of last spring, so it looks like this summer will end without that much-talked-about summer rally. Of course, some might argue that Sept. 21 -- not Labor Day -- marks summer's official end, but that's grasping at straws.

What should concern us most in here? Look at how many stocks have broken down in the past few weeks. On Aug. 7, I wrote about the Microsoft (MSFT Quote) chart and how it was toying with the $64 to $65 level. At the time, I noted that breaking that level wouldn't bode well for the stock or for the market. Well, you can plainly see it broke.

It broke that uptrend line (connect the December low with the two March lows) at the same time it broke a previous support level. Now it's come down to its high-$50s support level and bounced. But here's where I'm concerned: Where is it going on the upside? The answer is nowhere.

First, it has left all that resistance overhead at $64-$65. Even if it manages to get through that, it will meet resistance at the underside of the broken uptrend line, around $68. That resistance between $65 and $75 took four months to develop, so if we use my basic rule of thumb on time, then we can expect Microsoft to take a few months to eat through the resistance it has left behind. That's the best-case scenario.

Microsoft isn't alone in breaking its uptrend line and leaving resistance overhead. Best Buy (BBY Quote) has broken its uptrend line, too, which is quite steep. This stock might take more time to roll over, as its top is quite small right now, but breaking an uptrend line is an early warning sign that momentum has begun to shift.

And take a look at Dell (DELL Quote). Dell has not only broken its uptrend line, but also has left all that resistance between $25 and $30 overhead.

In a bull market, stocks blow right through resistance, and they do it with volume. In today's market, we don't have stocks blowing through resistance. We have them stopping at or below it. And we surely don't have the accompanying volume.

Overbought/Oversold Oscillators

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