Dow Takes A Dive

Dow components SBC, Philip Morris and GE sent stocks plunging on Friday.

The Nasdaq dropped 22 to 1199, the S&P 500 fell 27 to 827, and the Dow plunged 295 to 7701. Volume declined to 1.51 billion shares on the NYSE, and 1.45 billion on the Nasdaq. Decliners led 22 to 9 on the NYSE, and 22 to 10 on the Nasdaq. Downside volume was 87% on the NYSE, and 67% on the Nasdaq.

SBC fell 8% after announcing layoffs and CapEx cuts. Lucent fell 14 cents to a new low of 77 cents a share.

Cisco touched a new 52-week low by one cent at 11.13 before recovering to close at 11.23.

Manugistics plunged 31% on license revenue worries. Cognos gained 7% after beating estimates.

webMethods fell 19% on a downgrade.

GoAmerica gained 12 cents to 37 cents on an upgrade.

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 two charts below) took quite a dive today. If the index is going to build the flat correction we were looking for before a final wave down, another run at 8000 could be in the cards. Support is 7665, and 7532 is critical. Resistance is 7871-7922 and 8051. At this point, 8051 is unlikely to be taken out on any run back toward 8000. The Nasdaq (third chart) put in an imperfect evening star reversal today. 1214-1221 is first resistance, 1235-1239 is next, and 1251-1270 is critical resistance. 1195, 1184 and 1170 are all important supports. Below 1170, the Nasdaq should see 1050-1080. The S&P (fourth chart) has support at 814-815, and 775-807 is critical. 830-833 and 844 are resistance, and 857-870 is critical resistance. We should once again mention the importance of the support in this area: Dow 7500 propped up the market throughout the Asian crisis of 1997-1998 and is a level investors are very comfortable with; the S&P in the 775-807 area has the top of a rising channel that was resistance for more than 50 years, along with the 50% retracement levels off the 1932 and 1974 lows; and the Nasdaq has its 1974 trendline at 1200. If the market had generated 90% downside days into those supports, we’d be hopeful that they could hold, but so far we haven’t seen the level of capitulation that makes for lasting bottoms. One positive development is that S&P commercial futures traders, the so-called smart money, have reduced their short position substantially in recent weeks. Another couple of weeks like this one and they’d be net long for the first time in two years.





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