Investors Sell Just About Everything

There was no place to hide on Friday, as investors sold even safe havens like tobacco and drug shares in the third straight high-volume sell-off for the market.

The ISDEX lost 2 to 103, and the Nasdaq fell 23 to 1440. The S&P 500 dropped 17 to 989, and the Dow lost 177 to 9253. Volume soared to 1.82 billion shares on the NYSE, and 1.94 billion on the Nasdaq. Decliners led 18 to 13 on the NYSE, and 17 to 16 on the Nasdaq.

IBM and Intel notched new 52-week lows.

Qualcomm slipped despite a positive preannouncement.

Dell finished in the green on an upgrade.

Cognos rose 6% after beating estimates. TIBCO slipped after matching estimates, and GlobespanVirata fell 6% after warning.

Solectron rose on better than expected results, while Intuit fell on news that it’s selling its mortgage business.

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.

Fasten your seatbelts and return your seats and trays to an upright position. The market may be coming in for a landing, but it looks like it could be a rough one. The signs are short-term bearish, but longer-term bullish. Once we get through the next 3-5 days, the technical picture could turn bullish. To start with, the Dow and S&P formed the reliably bearish “three black crows” pattern today (see first two charts below). The good news is that the pattern gives us both minimum downside targets (half the pattern again to the downside, or 8805 on the Dow and 965 on the S&P) and maximum upside ones on any rally before then (to the middle of the second candlestick, or 9490 on the Dow and 1013 on the S&P). Below 965, the September 21 closing low, the S&P has next support at 944 and 923. The NYSE TRIN had its second consecutive close above 2.0 today. That has historically meant a very good rally within a week or two, and has even marked major bottoms, although it only resulted in a three-week rally a couple of months ago. This time, however, the signal is being accompanied by better sentiment readings, such as a 1.29 closing put-call ratio and – finally – more equity put buyers than call buyers. However, the VIX, the options volatility index, finished down today, a bearish sentiment divergence. Both of those readings may be skewed because of options expiry today, but overall, the market continues to put together the pieces for a good bottom. We did not get extreme TICK readings, however, so the score stands at two for the NYSE and one for the Nasdaq. Bottoms over the last couple of years have been made of 3-to-5 -1000 TICK readings, so we may still have a few days of severe selling ahead. The Nasdaq (third chart) looks headed for the 1357-1387 area, the October 1998 and September 2001 lows, and potentially lower than that. Note in the Nasdaq chart the negated “three black crows” in early May that worked out eventually and then some. The last three days look like an imperfect three black crows on the Nasdaq, which could limit upside to 1480 or so.



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