Techs, Nets Continue Free Fall

Still reeling from Nortel's massive earnings warning last week, technology and Internet stocks were battered again on Tuesday.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 13 to 329, and the Nasdaq dropped 76 to 2348. The S&P 500 lost 14 to 1287, and the Dow slipped 9 to 10,790. Volume declined to 475 million shares on the NYSE, and 817 million on the Nasdaq. Decliners led 15 to 13 on the NYSE, and 21 to 12 on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

Telecom equipment and networking stocks continued to lose ground in the wake of Nortel's warning. Nortel suppliers Corning , down 2.80 to 30.20, and JDS Uniphase , down 3 3/8 to 32 7/16, continued to lose ground. Cisco lost 1 5/8 to 26 5/8, and Juniper declined 3 11/16 to 76 5/16.

Communications chip stocks were weaker on downgrades from CS First Boston. Applied Micro fell 4 7/16 to 39 3/8, PMC-Sierra dropped 5 13/16 to 46 11/16, and Broadcom lost 5 1/2 to 68 5/8.

Ariba continued to hit new 52-week lows, down another 2 3/8 to 19 1/8.

Portal Software was a rare bright spot, rising 1 to 10 3/16 on a contract with Vodafone.

FairMarket rose 1/2 to 2 3/8 on an agreement with eBay .

24/7 Media lost 3/32 to 1 3/32 after the company rescheduled its earnings report from February 26 to March 21 to evaluate strategic alternatives to improve its tax position and to provide investors with a more definitive outlook for the year.

Breakaway Solutions tacked on 1/16 to 1 3/16 after signing agreements for $33 million in financing and announcing plans to cut 108 jobs.

Some technical comments on the market: Note: We are now including 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

The Nasdaq is breaking down out of its 1990 logarithmic trendline today, which we will peg at 2388 (first chart). Also, here's a link to a much larger version, showing the breach of support: http://cache.wsrn.com/images/AHT/compx90220.gif. That line would definitively break on a close of 2340 or lower, but the Jan. 3 rally attempt wouldn't be negated unless the Nasdaq closes below its Jan. 2 close of 2291, right about at the level where the Fed cut interest rates on Jan. 3. So are we going to panic here? It's hard to based on the internals: volume is low, and new highs/new lows and breadth are holding up pretty well. Not the kind of internals that would normally accompany a major support break. It seems to us more likely that the Nasdaq is trapped between the Greenspan Low at 2300 to the downside and the September downtrend line (second chart) at about 2450 to the upside. Having been burned once by Greenspan at 2300, sellers and shorts are understandably cautious at that level.

The S&P 500 broke back below its September downtrend line at about 1300 today and took out Friday's lows in the process. Not a good showing from the broadest market i