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The big decline at the market's open yesterday took the


down to just about where some support would be expected. As you can see, the support of November seemed to come back into play yesterday. That also suggests the rally is likely to go further. In fact, there even may be room for nimble traders to make some money on the long side.

But more important is the larger picture. The upward move that began last July was a well-defined trend. That trend started to lose momentum in November, but the narrow channel continued. Now the uptrend has been decisively destroyed.

There has been a radical change that cannot be ignored, or passed off as just a correction, as seems to be the song being sung by both the government and the media. This was an important break, and one that was warned about repeatedly in this column. I am willing to try to play a rally here, because it is such an oversold short-term situation. But longer term, I do not believe the decline is over.

To view a larger version of these charts (in some browsers), after clicking on the "larger image" link below the chart, mouse over the lower-right area of the chart until the icon with four arrows appears. Then click on that icon.

November Support's in Play on Dow
But the longer-term decline isn't over

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Source: MetaStock

Ballard Power: Buy

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Source: MetaStock

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Ballard Power

(BLDP) - Get Report

is a lower-priced stock that looks interesting as a possible speculative buy. There has been little effect on its shares by the recent drop in most markets. It broke out of a base last week with increasing volume, a widening trading range and with a gap.

Since then, it has pulled back moderately, and volume has declined on the pullback, which is desirable. It appears to have strong support at about $5.50. I would be inclined to buy around current levels and have a stop just below those lows.

(To do my Equivolume charting, as in the charts that appear in this column, I use a charting program called

MetaStock. To learn more about this method, read my series of columns,

Trading With Equivolume


Olin: Buy

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Source: MetaStock

The pullback in


(OLN) - Get Report

seems well contained at this time. It had enough of a rise last week to break though a resistance level that had been in place since last June. That gives it a very wide base to work from and suggests it could have a substantial and long-lasting advance. The MACD and the Volume Adjusted moving averages have both crossed to the positive side. It looks like a buy around current levels, with a stop below the ascending trendline indicated on the chart.

Novartis: Short

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Source: MetaStock

As is true with a great many stocks because of the recent plunge in the market,


(NVS) - Get Report

may be overdone on the downside, short term. But on a longer-term basis, the recent break not only seemed to end the sideways consolidation going back to November, but turned it down out of a much longer-term uptrend. I would be looking for a rally in here, and if it comes in with light volume, it would be a good opportunity to go short.

Conceptus: Short

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Source: MetaStock

With the sudden drops across the board, there is no lack of downturning stocks, but I look for ones that have built a top recently, rather than ones that have gone directly from an uptrend to a downtrend. This one,


( CPTS), appears to meet that requirement. It broke support on volume, with a gap, and has since weakened further. I would expect some rallying before going lower and would wait for such a rally before going short.

At time of publication, Arms had no positions in the stocks mentioned.

Richard Arms is a renowned stock market technician who invented the Arms Index (often referred to as the TRIN), which has become a mainstay of market analysis, appearing in

The Wall Street Journal



. Arms also developed the widely used technical method Equivolume Charting. Since 1996, he has been publishing the Arms Advisory newsletter for money managers and financial institutions. He also has authored

Profits in Volume


Volume Cycles in the Stock Market


Trading Without Fear


The Arms Index

, and has been honored with the Market Technicians' Award for Lifetime Contribution to Technical Analysis. At the time of publication, he had no positions in stocks mentioned in this report, although holdings can change at any time. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Richard appreciates your feedback;

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