Banks, Chips Hit Hard

Banking and chip stocks fell more than 5% Thursday on warnings from the Bank of New York and AMD.

The Nasdaq fell 21 to 1165, the S&P 500 lost 8 to 818, and the Dow dropped 38 to 7717. Volume rose to 1.68 billion shares on the NYSE, and declined to 1.65 billion on the Nasdaq. Decliners led 18 to 13 on the NYSE, and 18 to 13 on the Nasdaq. Downside volume was 66% on the NYSE, and 72% on the Nasdaq.

After the close, EMC warned, Research in Motion beat earnings estimates but missed revenue estimates, Interwoven warned, and Foundry , FreeMarkets and Integrated Circuits reaffirmed guidance.

During the day, AMD plunged 32% on a warning.

KLA-Tencor fell 7% on rumors that the company may warn.

Check Point rose 3% despite warning.

Cisco closed below $10, down 88% from its all-time high.

Broadcom fell 11% on a downgrade.

Veritas plunged 19% after the company’s CFO resigned for misstated credentials.

Adtran soared 20% after raising guidance.

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.

The Dow (first chart below) seems to be dragging out this wave 4 consolidation. If it can turn up in the 7600-7665 area tomorrow, bulls will no doubt see a head-and-shoulders bottom forming. However, any bottom without 90% downside days, a high equity put-call ratio coupled with a high VIX, and more bears than bulls in the Investors Intelligence survey is not going to last, and it is our hope that the market can put in a major bottom in the next month or two, in line with the four-year cycle. The target for that low remains 6950-7150, although we would not rule out 6250-6500. To the upside, if the Dow can take out 7900 tomorrow, it could be headed for 8012-8051, and potentially 8100. The unemployment report in the morning could cause an early sell-off, but we wouldn’t be surprised to see that dip bought in the 7600-7665 area; if that support fails, the market could go down hard. 7532, 7460 and 7380 are possible supports. The banks (second chart) look terrible, and should be headed for at least 611, and potentially 583. 668-671 should now be resistance, although an overthrow of that target is possible. The pattern forming in that index is a bearish flat-bottomed broadening pattern. The Nasdaq (third chart) could find support just under 1160 tomorrow – call it 1155 – and resistance is 1200-1206. If 1155 goes, 1145 is possible support. The S&P (fourth chart) has resistance at 835-840, and support at 812-815 and 800.





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