Another Drubbing For Stocks

A modest rally on a lukewarm unemployment report Friday gave way to yet another steep sell-off.

The Nasdaq fell 25 to 1139, yet another new low, the S&P 500 lost 18 to 800, and the Dow dropped 188 to 7528. Volume rose to 1.83 billion shares on the NYSE, and declined to 1.59 billion on the Nasdaq. Decliners led 24 to 8 on the NYSE, and 23 to 9 on the Nasdaq. Downside volume was 85% on the NYSE, and 82% on the Nasdaq.

EMC plunged 23% on a warning, sending QLogic , Emulex and Brocade 10-15% lower.

IBM and Cisco were among the stocks setting new lows.

Research in Motion , Foundry , FreeMarkets and Integrated Circuits rose on positive earnings news.

Interwoven fell 17% on a warning.

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

No 90% downside days today despite the fact that the NYSE had 90% downside volume for most of the day until mid-afternoon. As long as dip buyers keep jumping in instead of throwing in the towel, the market will be prevented from finding a lasting bottom. A large amount of equity call buying was another negative sign that too many traders are trying to pick a bottom. At this point, the odds are about even whether wave 5 down has begun, or if we have another wave up toward Dow 8000 (7981 would now be about the maximum to expect on any rally) before a final low. The middle of next week is a promising cycle turn window, so whichever way the market heads into next Wednesday could be telling. Our target for a low is 6909-7152. If the Dow (first chart below) breaks 7460, wave 5 down would likely be under way. 7380 is a possible support, as is 7161. Resistance can be found at 7600, 7700, 7800 and 7981; any one of those levels could stop a rally. The next support for the Nasdaq (second chart) is likely around 1120; 1050-1084 is a strong support zone. Resistance is 1160 and 1192-1206. The S&P (third chart) has critical support at 775; 750 and 700 are other possible supports. Resistance is 810-815, 825 and 835. The banks (fourth chart) continue to look just awful, putting in an imperfect bearish “three black crows” the last three days. The target for that pattern is 598.





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