RealTime IT News

Blue Chips Fall On Fed Inaction

Blue chip stocks fell Tuesday after the Federal Reserve declined to lower interest rates despite concluding that the economy remains vulnerable.

The Nasdaq slipped 2 to 1182, the S&P 500 lost 14 to 819, and the Dow dropped 189 to 7683. Volume rose to 1.67 billion shares on the NYSE, and 1.67 billion on the Nasdaq. Decliners led 22 to 9 on the NYSE, and 21 to 12 on the Nasdaq.

After the close, Micron slipped after missing estimates. Register.com warned, and RF Micro raised estimates.

During the day, concerns about EDS' balance sheet sent the stock plunging and competitors IBM and Computer Sciences to multi-year lows. IBM was also hit by pension plan and stock option concerns.

Cisco lost 4.4% on cautious comments from CEO John Chambers.

Palm rose 13% despite warning.

Newport fell 17% on a downgrade.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the internetstockreport.com story link at the top of the newsletter.

At this point, it looks like the Dow (first two charts below) will test the July low of 7532 before it can generate a meaningful bounce. It's also a good time to revisit the likely Elliott wave count off the March high in the Dow. It looks to be shaping up into a 5-wave decline, and we are somewhere in the middle of the final wave down. Separating that fifth wave down into five waves of its own, we are still waiting for the wave iv rally, which would likely be a flat consolidation lasting a week or so and capped by 7922, and then down for the final leg down. Possible downside targets under that scenario are 6250-7200. Hopefully that final leg down will be accompanied by at least a couple of 90% downside days so we can have some confidence in the durability of any rally. The bullish alternative at this point would have us revisit the August highs; 814-815 on the S&P would be one place where that rally could launch from. Support on the S&P (third chart) is 814-815 and then 775-807. 830-833 and 839 are resistance levels. The Nasdaq (fourth chart) made a nice recovery today. Below 1170, 1050-1084 is the next strong support, and 1192-1206 is first resistance.





Don't miss the Company of the Week - every week - at http://www.wsrn.com/COW/.

Special report: For a free introduction to technical analysis and chart patterns, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.