Employment Data Sinks Stocks

The market ended the week on a down note on news that the economy added only 6,000 jobs last month and the average work week unexpectedly shrank. Factory orders also fell, continuing a string of weak economic data.

The ISDEX http://www.wsrn.com/apps/ISDEX/ lost 2 to 88, and the Nasdaq fell 32 to 1247. The S&P 500 lost 20 to 864, and the Dow fell 193 to 8313. Volume declined to 1.54 billion shares on the NYSE, and 1.42 billion on the Nasdaq. Decliners led 23 to 8 on the NYSE, and 22 to 10 on the Nasdaq.

National Semi slipped 1.5% on a warning. Chip stocks in general were weak, with Texas Instruments and Applied Materials hitting new 52-week lows.

Tekelec surged 29% after beating estimates, but Synaptics fell 17% on its earnings report.

Cisco , off 1.7%, continue to fall ahead of its earnings report on Tuesday.

AOL fell 6.5% on news of an investigation into the company’s dealings with PurchasePro .

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

Another down day on Monday and we could get the bearish “three black crows” on the Dow, the S&P and the Nasdaq. One hint that it could happen is that we got an imperfect version of that pattern today on the SOX, the semiconductor index (see first chart below). But all is not lost just yet. We still don’t have a single distribution day (a higher volume sell-off) in this rally, and the VIX (second chart below) showed a healthy amount of bearish sentiment today. If we can get equity option traders to start buying more puts than calls, we might get a good double-bottom on a retest of the July 24 lows (7532, 775 and 1192). If not, we may yet reach our downside targets of 6900 on the Dow and 693 on the S&P. Also encouraging was that the S&P commercial futures traders continued to cover shorts. Heck, even gold futures positions were bullish this week, raising the possibility of a rally in which stocks and gold rise at the same time, similar to April 2001. Onto support and resistance levels. Both the Dow (third chart below) and the S&P (fourth chart below) found some nice support today at 8200 and 853. Much lower than 8200 on the Dow and 844 on the S&P and a retest of the lows becomes likely. A good retest would take place at 800 on the S&P. To the upside, 8530 and 890 are the levels to beat to resume the uptrend. The Nasdaq (fifth and sixth charts) has one possible support at 1220, but a retest of the 1192-1200 area now appears likely. If that goes, it’s hard to see strong chart support until 1080 and 1000. The Nasdaq has resistance at 1262, 1286 and 1320.





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