The reasons for Friday’s sharp sell-off in the market were many and varied: a huge earnings warning from Ford, a likely downward revision to GDP, a court decision against Microsoft, and an earnings warning from Dell.
The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 6 to 174, and the Nasdaq dropped 63 to 1867. The S&P 500 lost 19 to 1161, and the Dow fell 151 to 10,240. Volume declined to 978 million shares on the NYSE, and 1.29 billion on the Nasdaq. Decliners led 19 to 11 on the NYSE, and 24 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.
Dell plunged 2.33 to 23.05 after matching estimates with 16-cent earnings, but guiding third-quarter earnings down from 17-cent estimates to 15-16 cents, and the company also said it doesn’t see a recovery until the first quarter or two of next year. Hewlett-Packard
, off .08 to 24.05, topped lowered estimates with 5-cent earnings.
Microsoft plunged 2.74 to 61.78, breaking its 200-day moving average, after the company lost its request to delay an antitrust remedy hearing.
Intel led chips stocks lower, falling 2.20 to 27.96.
eBay fell 2 to 59, breaking critical 60 support.
Agile Software dropped 1.05 to 9.75 on a Morgan Stanley downgrade to Neutral.
Juniper Networks lost 1.52 to 18.50 on a Buckingham Research downgrade.
Scientific Atlanta plunged 3.77 to 21.24 on a warning.
Lucent climbed .02 to 6.34 on an improved credit outlook.
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We’ll start with the positives tonight, because there’s only two of them. First, fear hit healthy levels today, with a close on the put-call ratio above the important 1.0 level, but that high reading could be due in part to options expiration today. And second, the Nasdaq (first chart) held its all-important lower trendline at 1860, the level at which the bulls needed to make a stand. Now can they rally this market? Coming in a potential cycle turn window (today-Monday), a rally into Tuesday’s Fed meeting isn’t out of the question. But now for the negatives. This kind of action – rallying just enough to relieve oversold conditions – gives the market more room for downside. The leaders – GE and Microsoft – broke down today. The Philadelphia Semiconductor Index – which often leads the market – fell almost 5% today. The Nasdaq (second chart) broke down out of a trendline it had pierced yesterday and exceeded the 62% Fibonacci retracement level (1890) of the April 4-May 22 run, which means that the move down is now a trend in its own right. That increases the likelihood that the April lows (1619) will be revisited at some point. The 1890-1910 level should be first resistance. The S&P 500 (third chart) joined the Nasdaq in another lower low, breaking 1165 support and closing below it. Below 1155, a retest of the 1080-1100 low would become likely. The Dow (fourth chart) is the only index left holding its recent low (10,200), but is forming a descending triangle, a bearish pattern. Below 10,120-10,200, critical support is 9950-10,000. To the upside, 10,500 remains the level to beat. And finally, something to be taken with a grain of salt, but we should at least mention the remote possibility that next week could be a hard down week for the market. The indexes have all been tracing out a pattern similar to the panic of 1946. If the similarity continues, the bulk of the down move would come next week. Again, not a high-odds play by any means, and the better way to bet is a bounce, perhaps after another day or two of downside.
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