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Stocks Battered On Enron Implosion

Stocks were battered again on Wednesday, led lower by blue chips that stand to lose hundreds of millions if Enron files for bankruptcy.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 10 to 177, and the Nasdaq dropped 48 to 1887. The S&P 500 lost 20 to 1128, and the Dow fell 160 to 9711. Volume rose to 1.4 billion shares on the NYSE, but the increase was due to a record volume day in shares of Enron. Volume declined to 1.8 billion on the Nasdaq. Decliners led 20 to 10 on the NYSE, and 23 to 12 on the Nasdaq.

After the close, Brocade rose slightly after topping estimates by a penny with 5-cent earnings and reaffirming estimates, and Nvidia climbed on news that it will replace Enron in the S&P 500.

During the day, Enron , once the number seven company in the Fortune 500, continued its spectacular implosion when the company's merger with Dynergy fell through. The company's debt and hedge exposure is in the billions, and Citigroup , JP Morgan and GE all fell on fears that the companies could lose hundreds of millions if Enron files for bankruptcy.

Stocks also fell on a weak assessment of the economy in the Fed's beige book.

Flextronics rose .80 to 26.35 on a positive conference call, but Dell slipped 2% despite an upbeat conference presentation.

Ciena fell 12% on a cautious presentation.

ONI fell 20% after the company said visibility remains limited. Applied Micro also fell on similar comments.

Some technical comments on the market: Note: We include charts in the technical market commentary. If you can't get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

First, an editorial comment: There is a reason that financial planners recommend limiting exposure to company stock, as the unfortunate employees of Enron have found out. Hopefully one result of the Enron implosion will be a rule or law encoding that practice in company retirement plans. And now on to today's action. The bottom line is simple for tomorrow: the S&P 500 (first chart) has no downside at all, and the Dow (second chart) has about 30 points of downside, or we will get breakdowns out of bearish rising wedges. A close below those lines and the top may be in. However, until they break, another wave back to the highs or higher is possible. The Nasdaq (third chart) would need to close below 1800 to end its uptrend. First support is right here (1887), and then 1840-1860. Resistance is 1910, 1935-1940, and then 1968, a critical level that repelled the index yesterday.

Special report: For a free introduction to technical chart patterns and an overview of last year's action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.