Big Gain Becomes Big Loss

An early triple digit gain for the Dow on Tuesday turned into a triple digit loss by the close, and the other indexes followed the blue chips downhill.

The ISDEX lost 2 to 110, just 4 points above the September low, and the Nasdaq fell 33 to 1497, 110 points above the September low. The S&P 500 dropped 17 to 1013, and the Dow fell 128 to 9517. Volume rose to 1.41 billion shares on the NYSE, and 1.69 billion on the Nasdaq. Decliners led 20 to 11 on the NYSE, and 22 to 12 on the Nasdaq.

After the close, CMGI missed estimates and warned.

During the day, Nokia rose 4.6% on a revenue warning that was better than expected.

IBM closed at a new 52-week low.

Advent plunged 37% on a Goldman Sachs downgrade.

Liberate fell 16% on a warning.

ESS Technology gained 2% on positive analyst comments.

Overture gained 6% on a deal with Lycos.

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.

Not exactly what you look for on a retest: high volume and a close just above the previous lows, the critical supports of 9472 on the Dow (first chart), 1012 on the S&P (second chart), and 1495 on the Nasdaq (third chart). So the odds play would be that we break those levels tomorrow. The next strong supports are 995 on the S&P, and the 1450 area on the Nasdaq. Also, the Nasdaq 100 (fourth chart) is just above the September lows of 1088, and the October 1998 low of 1063 (the corresponding levels on the Nasdaq are 1387 and 1357). A bounce could occur from those supports into next week, when the market is at its most vulnerable for a sell-off, per our model. Again, a low in the June 24-28 timeframe still looks likely to us. The low could be an important one if it is accompanied by extreme bearish sentiment. One indicator we are looking at is +DI in the Dow, or buying pressure, which tends to get under 10 at important bottoms, just as -DI, or sell pressure, fell under 10 at the exact top in the Dow. +DI readings under 10 marked the March 2001 and September 2001 Dow bottoms. Any bounce now will have a tough time getting above 9800 on the Dow, 1049-1054 on the S&P, and 1595-1610 on the Nasdaq. The Nasdaq and S&P haven’t come close to those critical resistance levels, with the Nasdaq mired below 1550 resistance, and the S&P unable to clear 1040. The XAU (fifth chart), the gold and silver index, didn’t quite get to the critical 72 support level today before bouncing very nicely. One indicator that suggested a gold stock rally was Rydex funds’ XAU assets, which fell by 26% yesterday. A 25% increase in Rydex XAU funds marked the top for golds last week. A good tool for measuring extremes in gold sentiment, and we’ll watch to see how quickly traders jump back into gold here for signs of a top (unfortunately, the numbers are updated too late at night to be of use to Market Close readers). Any rally may have a tough time getting above 82.50 on the XAU.





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