A much anticipated speech on corporate accountability by President Bush failed to appease investors, who turned a modest gain when the speech began into a rout that erased Friday’s massive gains.
Bush himself has come under fire lately for insider sales he made in the early 1990s as a director at Harken Energy Corp., which ran afoul of the SEC by hiding millions of dollars in losses through the sale of a subsidiary to a group of insiders.
The ISDEX http://www.wsrn.com/apps/ISDEX/ lost 1 to 101, and the Nasdaq fell 24 to 1381. The S&P 500 dropped 24 to 952, and the Dow fell 178 to 9096. Volume rose to 1.35 billion shares on the NYSE, but declined slightly to 1.69 billion on the Nasdaq. Decliners led 19 to 12 on the NYSE, and 19 to 14 on the Nasdaq.
After the close, it was announced that eBay
will join the S&P 500 effective July 19.
During the day, Microsoft
edged higher on positive comments from Bernstein. EMC
also gained on Bernstein comments.
plummeted 62% and Citrix
fell 15% on warnings. AOL
was unchanged on news of a $10 billion credit facility.
slipped 1% ahead of tomorrow night’s earnings report.
fell 24% on a lawsuit by Computer Associates
was unchanged after reaffirming estimates, but saying that there is no uptick in PC demand.
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This correction has gone as far as it can go without becoming a new downtrend. About the only good news for the bulls is that the VIX, the options volatility index (see first chart below) set a new closing high for this move, so fear could limit downside here. And the Nasdaq (second chart) held onto gap support at 1380, but just barely. The deep correction, however, will likely limit further upside to about 1495 on the Nasdaq, 1010 on the S&P 500 (third chart), and 9595 on the Dow (fourth chart) – that’s assuming that there is no further downside here. Those numbers are simply the upside targets if the first leg up is duplicated, which is still the favored scenario here. One bit of good news is that July max-pain on the QQQ is 27, so a 10% gain for the Nasdaq 100 between now and July 19 would cause most options to expire worthless, a phenomenon that seems to work more often than not. But for now we just want to see the market head higher tomorrow, or last week’s lows of 1336, 935 and 8897 will come back into play.
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