Selling accelerated in the stock market on Friday, as continued signs of economic weakness outweighed an accommodative Federal Reserve.
The ISDEX http://www.wsrn.com/apps/ISDEX/ lost 16 to 397, and the Nasdaq fell 80 to 2702. The S&P 500 dropped 16 to 1356, and the Dow declined 76 to 10,907. Volume slipped to 450 million shares on the NYSE, and 750 million on the Nasdaq. Advancers led by a few issues on the NYSE, but decliners led 22 to 11 on the Nasdaq. January job gains came in stronger than expected, but most of the gains came in construction, unemployment edged up, and December’s jobs gain was revised sharply lower. 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.
Cisco , down 1 13/16 to 36 7/15, reports earnings on Tuesday.
Critical Path was halted at 10 1/16 on concern about the company’s revenue recognition practices, and President David Thatcher and Sales VP William Rinehart were placed on administrative leave. The few trades that went through were down about 60%.
Copper Mountain , off 1 27/32 to 5 31/32, matched earnings estimates but warned of future results.
Terra Lycos , down 1 7/16 to 14 1/8, continued to lose ground after the resignation yesterday of CEO Bob Davis amid a management shakeup.
VeriSign slipped 4 1/2 to 70 1/2 despite a positive analyst meeting yesterday.
RSA Security , off 1 5/8 to 60 1/8, announced a 3-for-2 stock split.
Netpliance , off 1/32 to 5/16, slashed its workforce by half.
Primus Knowledge , up 1 1/4 to 8 1/2, and EDGAR Online
, off 1/8 to 2 9/16, beat estimates. Buy.com
, down 9/32 to 5/8, missed estimates by a penny.
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
The Nasdaq (first chart) broke what may have been the neckline of a head-and-shoulders top today, but is so far holding at 2700 support. The support break on the Nasdaq 100 (second chart) is much clearer. Both indexes are once again trying to fill gaps at 2618.55 on the Nasdaq and 2470.72 on the Nasdaq 100; 2470, about 50 points from here, is about as low as the Nasdaq 100 can go without breaking down out of its rising channel (the black line). While the support breaks seem to give the indexes about 200 points of downside potential, we hope that nearby supports can hold. The maximum downside expected on the Nasdaq is about 2550, the lower channel boundary (black line) in that chart. The ISDEX (third chart) also broke down out of a head and shoulders top, with downside potential to 360, but that index is also close to filling a gap (388) and support (380-388).
The S&P 500 is also breaking down, with downside potential to about 1310.
The Dow will close below its September downtrend line on the weekly chart (first chart) after piercing it yesterday and today. To the downside, we expect that l
ower trendline at about 10,650 to hold, if the Dow gets that low. A close above 11,007 would be bullish under Dow Theory, the oldest school of technical analysis, particularly if the Dow Transports can stay above 3000; the Trannies are above 3100 today. We believe that Dow Theory – that the movement of the stocks of manufacturers and the companies that transport their goods is an indicator of the health of the overall economy – remains as relevant today as ever, so that 11,007 level looms large for the market, and the economy, as a whole.
Special report: For a free introduction to technical chart patterns and an overview of last year’s action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.
