Sellers Remain In Control

The stock market’s sell-off resumed on Monday, as even the smallest rally continued to be met by selling.

The ISDEX lost 12 to 776, while the Nasdaq dropped 83 to 3751, in the process breaking its uptrend from May. The S&P 500 fell 14 to 1451, while the Dow lost 81 to 10,845. Volume declined to 420 million shares on the NYSE and 690 million on the Nasdaq. Decliners swamped advancers by 18 to 7 on the NYSE and 25 to 11 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.

Allaire fell 6 9/16 to 10 15/16 after warning of a third-quarter 5-20 cent loss instead of a 7-cent profit. The company, which has been sliding since 38 at the start of the month, told Internet Stock Report last week that there was no reason to account for the stock’s decline. Two analysts reiterated Buys on the company last week.

Net2Phone fell 3 27/64 to 30 3/8 after trading as high as 37 on news of an alliance with Cisco Systems , off 2 1/4 to 60 1/2.

Digital Island , off 1 1/8 to 22 3/8, filed a patent infringement suite against Akamai , off 1 3/16 to 59 15/16, returning a similar lawsuit filed by Akamai against Digital Island last week.

PSINet continued to lose favor after an earnings warning last week, off 1 1/2 to 10 1/4 on a Salomon Smith Barney downgrade.

Evoke Communications managed to gain 3/8 to 8 5/8 after announcing that it would provide live audio streaming for eBay’s new live auctions feature. eBay fell 1 7/16 to 66. Yahoo lost 3 3/8 to 102 1/2; the stock has twice bottomed at the 99 1/2-99 3/4 level. added 1/32 to 3/4 after announcing plans to reduce its workforce by 20%. was unchanged at 4 7/8 after pre-announcing results that some analysts took as beating estimates, but not Deutsche Banc Alex. Brown, which downgraded the stock to Buy from Strong Buy on lower-than-expected revenue projections.

Some technical comments on the market: The Nasdaq Composite (3810) and the Nasdaq 100 (3610) broke their May uptrend lines this morning, a worrisome sign. So how low can the techs go? First support on the Nasdaq is 3650-3725, and then the August bottom of 3521. If the Nasdaq breaks 3500, the final bottom for this market is likely to be 3000 or lower. Given that investors haven’t seen much to like in earnings reports over the last couple of months, there isn’t likely going to be much good news for the market for a while. A neutral Fed is built in to stock prices at this point, and investors don’t like the combination of weakness in companies’ core businesses while they meet their bottom lines through investment gains. To the upside, the first sign that all is not lost would be a quick move back above the May trendlines. The ISDEX is a long way from its May trendline, which is at 720. To the upside is 790-800 resistance.

We said the Dow looked tired last week, and boy was it ever. It needs to hold here: the Dow is back at the upper boundary of the bearish diamond pattern the index broke out of last month. If it breaks much below 3850, critical support is 10,650-10,700, the index’s October 1998 trendline. The S&P 500 broke 1460 support this morning. Next strong support is 1435-1440, and then 1425. Critical support is around 1405.

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