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Carnage in the Nasdaq and Russell 2000 Indexes

NEW YORK (TheStreet) -- Make no mistake about it. There has been some serious damage done to the Nasdaq and Russell 2000 indexes.

Since March 5, the Nasdaq is down 6.4% after getting closing down another 47.97 points on Monday at 4079.75. Even though that was 27 points off its day low of 4052, the Nasdaq is in Trend Bearish territory. That is a three-month or longer time frame.

The Russell 2000 is also in Trend Bearish territory after closing down 17.60 points to finish at 1135.78. These two indexes have been telegraphing this market sell off for the last couple weeks. As I have been saying in my columns, there was a two tiered market going on. The DJIA and S&P 500 vs. the Nasdaq and the Russell 2000. Someone had to win the battle and the decision goes to the latter.

The DJIA and the S&P are both in Trend Bullish territory as of Monday. The DJIA closed down 166.84 points at 16245.97 and the S&P 500 closed down 20.05 points at 1845.04.

The question now is where do we go from here? The S&P and DJIA still have a ways to go to the downside before they become Trend Bearish. At this point, the path of least resistance is down.

The S&P volume was again higher than its 50-day moving average. As I have been alluding to on the down days, the volume has always been higher compared to the up days. It does not mean anything until it does. The volume does mean that distribution is going on within stocks.

There is some positive signs, however, among the carnage in some stocks. We are now starting to have some oversold conditions showing up in the large-cap stock area, stocks with market caps in excess of $4 billion.

I expect to see the indexes to provide a relief rally over the next few days. It could start as early as Tuesday, more likely Wednesday. In any event, look for the oversold rally to take place this week.

However, any rally should be met with selling, as the support areas in the indexes now become resistance levels. The S&P 500 1865 area should provide that resistance according to my algorithm process. The 1822 level in the S&P needs to hold or that index will be Trade Bearish. There are a lot of things to consider now. Caution is the word of choice now.

At the close of trading on Monday, I closed my Proshares Ultra VIX Short-term Futures, (UVXY) for a nice gain. Also, I closed my short position in Kinder Morgan, (KMI) for a nice gain. I added to my short position on LG Display (LPL).

At the time of publication the author held a short position on LPL.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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