Remember those 60 minute negative divergences, and the rising wedge on the S&P and Dow, and the support on the Naz and AAPL, that I was talking about in the last blog? Well, do you remember?

I also spoke of low volume. And even though it can discount the strength of a move, I think in this case you have to respect the result. And what result was that? The fact that the S&P, Naz and the Dow lost support of their rising wedges. Kind of sounds like an adolescent prank, doesn’t it? …”lost support of their rising wedges.” To quote Butthead, “that’s cool!” Any ways, losing this key support was critical, even though it was in the midst of low volume.

The S&P and Dow lost these key support levels due to weakness in financials. The banks and big finance houses just won’t go away. They have become a constant recurring sore. I mean Fannie and Freddie Mac were just crushed today.

Today (August 18) left us quite oversold in the 60 minute timeframe, so tomorrow morning I expect a little rebound from today’s action. Perhaps even testing the levels that were just lost. What were once support, now have become resistance. I expect after the bounce, the markets will slowly erode.

EDIT 7:12 AM EST: I don’t think there will be a bounce. More like a steady decline, predicated on the PPI report and housing starts.

For how long, you may ask? Well I don’t rightly know. I suspect it will be a grinding type of decline, one that will extract a degree of grief and torment. This is still a bear market after all, or did you forget about that? Now I don’t believe we’re going to retest the lows, but I do believe the fight to regain the advances made in this 5 to 6 weeks off those lows is going to be arduous.

How will AAPL react during this time? I would expect much like it has in the past several weeks, defiant. The S&P and the Dow were big losers today, and the Naz broke down out of its rising wedge at 2450 and lost its 200-day moving average at 2428 (a double whammy!), but still sits well above its 20 and 50. Unfortunately the other 3 Horsemen of Technology (GOOG, RIMM, and BIDU) are showing weakness. Man, that’s a lot of pressure on AAPL! I think AAPL will be slowly pulled down under the tremendous weight of the other Horsemen unless we can get a significant synchronized rally going. AAPL does have support in its 50-day moving average at 170.70, but if the other Horsemen lose their support, AAPL will not be able to hold up the rest by itself.

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Now for a needed distraction. Our morning vacation ritual is for me, my wife and Gyasi the Ridgeback to walk along Lamberts Cove beach towards Makonikey Head. We look for sea glass, I stop and throw stones into the crack of Split Rock, and we meet up with fellow dog lovers for a doggy play group. We had a couple of new members to the group including a 3 year old Great Dane. Here’s the gallery (tip: click on the gallery picture, then click on the next picture for the full resolution image)…