Not Even Warren Buffett Can Save Stocks

Not even an investment in the battered telecom sector by Warren Buffett could stop traders from selling on Monday, as accounting worries at Merck and an earnings miss by Alcoa set the tone.

The ISDEX lost 3 to 102, and the Nasdaq fell 42 to 1405. The S&P 500 gave back 12 to 976, and the Dow dropped 104 to 9274. Volume declined from last Wednesday’s totals to 1.17 billion shares on the NYSE, and 1.7 billion on the Nasdaq. Decliners led 18 to 13 on the NYSE, and 21 to 12 on the Nasdaq.

After the close, Retek and Citrix fell on warnings, and AOL rose on news of a $10 billion credit facility.

During the day, eBay fell 7% on news that it will acquire PayPal .

Level 3 surged 51% on news that Warren Buffett’s Berkshire Hathaway was buying some of the company’s debt, along with Longleaf Partners and Legg Mason. Time Warner Telecom gained 22%, and Qwest gained 15%.

Yahoo lost 5% ahead of Wednesday’s earnings report.

Mentor Graphics fell 26% on a warning.

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.

As long as the Nasdaq (first chart below) doesn’t close below the bottom of Friday’s gap at 1380, the bulls have a shot at putting together a second leg to this rally. 1400, the top of that gap, is first support, and we do not want to see a gap down into that 1380-1400 gap or we will get a bearish island reversal pattern. That said, the move down so far looks corrective, so further upside remains the odds play here. If the Nasdaq can clear 1450-1460, it should be headed for at least 1500, if not 1550. The Dow (second chart) has a very clear downtrend line just under 9400. A move above 9400 could hit resistance in the 9450-9500 area, but above that the index could see 9750-9800. It’s hard to find critical support on the Dow until 9050-9100. The S&P 500 (third chart) faces strong resistance at 995-1000. Above that, resistance is 1006, 1013, 1025 and 1039. Critical support is 953-955.



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