As of this writing 1:15pm EST 7.29.10, the major averages are tracing out an ominous technical pattern known as a “negative (outside) reversal day” after encountering resistance near their prior chart highs. It is also worrisome to see leading stocks get smacked as the major averages decline.
Negative Reversals:
Every so often, there are a few ominous technical signals that emerge. Prudent investors have learned to identify them due to the fact that they tend to lead to lower prices. One of these disconcerting technical signals is called a negative reversal.
A negative reversal occurs when a stock (or market average) opens higher but then reverses and ultimately closes lower. Negative reversals are often considered more severe if the stock’s initial gains lift it to a new high, but it then reverses and closes for a loss on heavier than average volume and ends near the session’s utmost lows. Outside reversals occur when the current day’s range eclipses the prior days levels. Negative reversals can occur on a daily, weekly, and monthly chart. In general, the longer the time frame involved, the more concern is prompted by the severity of the reversal. It is important to note that volume is directly correlated with the severity as well.

Prior Chart Highs Are Now Resistance:

Here are a few examples of prior chart highs now becoming resistance:

NYSE- prior chart highs is resistance

RUT- Resistance prior chart highs