Nasdaq Ends Worst Year On A Weak Note

Barring a last-minute rally, the Nasdaq will end its worst year ever on a losing note, down about 38% on the year. The Nasdaq last had a year like this in the bear market of 1973-1974, when the index lost more than 30% in each year.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 24 to 358, and the Nasdaq declined 66 to 2491, the index’s fourth straight losing month. The S&P 500 slipped 6 to 1327, and the Dow lost 15 to 10,853. Volume declined to 420 million shares on the NYSE, but rose to 1.05 billion on the Nasdaq. Advancers led by a few issues on the NYSE, but decliners led 21 to 16 on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

Openwave gained 13/16 to 49 5/8 after settling a dispute with Geoworks , which soared 1 11/16 to 3 3/32.

Inktomi , down 2 1/8 to 17 15/16, and CacheFlow , off 3 13/16 to 17 1/4, continued to fall on slowdown concerns. Bear Stearns downgraded both stocks.

Priceline.com , one of the biggest losers of the great Internet bear market of 2000, slipped 1/32 to 1 9/32 on news that founder, vice chairman and largest shareholder Jay Walker resigned to focus on his intellectual property at Walker Digital, the incubator that gave birth to Priceline. The stock is almost 99% off its all-time high of 104 1/4.

Earnings warning continued to mount. 24/7 Media , down 3/16 to 1/2, NetSpeak , off 1 5/16 to 1 3/4, Net Perceptions , down 1/16 to 2, and Breakaway Solutions , down 5/16 to 11/16, all warned.

Osicom soared 5 1/8 to 17 3/8 on speculation that Sycamore may buy the company’s Sorrento Networks.

Some technical comments on the market: Note: We are now including charts in the technical market commentary. If you can’t get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

Well, based on 30 years of trading data, the Nasdaq had about a 75% chance of being up today and Tuesday. So much for playing the odds. Probably a fitting way to end the year. Now we get to watch the January indicator, which basically says that as the first five days and the month of January go, so does the year. It certainly worked this year, when the Nasdaq ended both the first five days and the month down.

January may have some tough going before it can turn up: we really don’t like what we see in the Nasdaq and S&P indexes right now. The Nasdaq could be forming a rising wedge or bear pennant here (see first chart). If it’s a bear pennant, how low could the index be headed? If we measure the “pole” from the previous consolidation at 2600, we could be headed for a retest of the lows. If we measure from the previous large consolidation at 3000, the picture looks much worse, setting up a potential downside target of 1900-2000. We’ll pick the rosier scenario, given the strong support of the 1990 trendline at 2300 on the Nasdaq.

The S&P 100 could also be forming a bear pennant or rising wedge, and may already be rolling over. A retest of the 650 level could be in store.

It’s probably also a good idea to take a look at recent trading on the S&P 500, which has

an interesting pattern the last couple of months. Note the lines with arrows on them: Each large consolidation has led to a move down equal to the distance from the previous consolidation. If the current pattern holds true to form, the index could be headed to 1200. Here’s hoping 1250 support holds.

The Dow is testing critical 10,900 resistance for the fifth time. A clean break of 10,900 would likely carry the index to 11,500, with the caveat that it could face resistance at 11,000, 11,200 and 11,400. A break of the lower support at 10,300 would likely lead to a retest of the 9700 lows. A close above 11,000 on the Dow and 3000 on the Dow transports (50 points from here) would be bullish under Dow theory, the oldest school of technical analysis. Best wishes to all for a prosperous 2001.

Special report: For a free introduction to technical chart patterns and an overview of this year’s action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.