Nasdaq Back Below 4000

The Nasdaq fell back below 4000 on Friday, weighed down by several earnings warnings and a disappointing conference call from Kulicke and Soffa.

The ISDEX fell 31 to 789, while the Nasdaq lost 119 to 3978. The S&P 500 dropped 8 to 1494, and the Dow slipped 39 to 11,220. Volume declined to 960 million shares on the NYSE and 1.5 billion on the Nasdaq. Decliners led 15 to 13 on the NYSE and 25 to 15 on the Nasdaq. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our new after hours trading site.

National Discount Brokers warned that the company would post a 6-9 cent loss because of difficult market conditions, instead of the 9-cent profit analysts expected. The stock plunged 8 to 27 13/16. E*Trade slipped 15/16 to 18 1/8, and Ameritrade lost 1 1/4 to 19 9/16.

Yahoo continued to fall on Internet advertising concerns, off 2 1/16 to 104 7/8. But the stock found support at 99 3/4, just above its July low of 99 1/2. DoubleClick fell 2 3/4 to 33 1/2, and Engage lost 1 1/2 to 10. CS First Boston reiterated Strong Buy on DoubleClick ahead the company’s Sept. 11 meeting with analysts.

CMGI continued to get a lukewarm reception to its reorganization plan, losing another 3 7/8 to 39 5/16. For more on the story, click here.

But the beleaguered Internet consultant sector found some takers on a William Blair & Co. upgrade of Scient , which soared 6 1/2 to 27 1/4. The firm said it expects Scient to make its numbers this quarter. Proxicom added 2 1/32 to 22 1/32, Sapient rose 3/4 to 48 5/8, but down from a high of 53, and Viant slipped 1/4 to 7 5/8 on a Robertson Stephens downgrade.

Telecom equipment stocks were lower on a Wall Street Journal article that said the declining revenues faced by traditional telecom stocks could lead to a slowdown in equipment spending. Cisco fell 2 3/8 to 63 7/8, Juniper Networks was down 18 21/32 to 196 7/32, and Northern Telecom fell 4 13/16 to 72 3/16.

Aether Systems slipped 2 13/16 to 141 3/16 after trading as high as 151 on a Lehman Brothers Buy rating and $210 price target.

BroadVision gave back 2 7/16 to 35 1/2 after confirming rumors of an alliance with IBM. The stock had run up on the rumors yesterday. NaviSite gained 7/32 to 45 5/32 after announcing an alliance with Compaq and EMC.

OTG Software rose 3/4 to 34 on a second day of positive analyst comments, this time from CS First Boston.

Commerce One gained 11/16 to 71 3/16 a day after closing above the important 70 level. The company is expected to announce additional contract wins in the near future. But Ariba lost 7 3/8 to 154 1/2, and i2 fell 9 5/16 to 160 1/2.

Tvia soared 3 1/2 to 15 3/4 on news of an alliance with Wind River Systems.

Some technical comments on the market: The Dow broke its rising wedge to the downside this morning, so now all the major indexes have broken their uptrends that began a month ago. They all have downside potential to last month’s lows, but there are a number of important support points that could bring a halt to the selling before then. The Dow has so far held 11,200 support; 11,100 is next, then 11,000, and then the important support of 10,900, the upper boun

dary of the Dow’s bearish diamond pattern, which the index broke out of last month. 11,200 may be the neckline of a head-and-shoulders top on the Dow; given that the Dow’s rally began in late July with an inverse head-and-shoulders bottom, the 11,200 level carries some significance. The Nasdaq, S&P 500 and the ISDEX have already broken rising wedges to the downside, not a good sign in September, historically the weakest month of the year. However, it is encouraging that today’s selling is so far not occurring on rising volume. That, of course, can also be a negative, since it’s tough to get capitulation on the part of sellers without high volume.

The Nasdaq closed below 4000 and its 200-day moving average at 4008, but finished above its 50-day moving average at 3,971. Yesterday’s recovery came on lower volume, so today’s selling did not come as a surprise. The Nasdaq struggled at 4100 resistance yesterday. We are hopeful that the sell-off on the Nasdaq and Nasdaq 100 can end at their downtrend lines broken two weeks ago. Those downtrend lines are now at about 3900 on the Nasdaq and 3750 on the Nasdaq 100; not too far from here. A high-volume decline and then a bounce off those levels would be a positive sign. A break below those levels would likely lead to a wider sell-off. First support on the ISDEX is 790-800, where the index finished today, but critical support is just above 700, which is now the intersection of the index’s March downtrend and May uptrend lines. To the upside, the ISDEX’s recent rally was capped by the 50% retracement level of 850. The S&P 500 is back below the important 1500 level. Next support is in the 1480-1490 range; so far, the S&P has held at 1490. The index has met with strong resistance around its all-time closing high of 1527. Have a good weekend.

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