Stocks Fall In High Volume

Stocks fell in high volume Thursday on war fears after Iraq expelled foreign journalists.

The Nasdaq fell 21 to 1298, the S&P 500 lost 13 to 882, and the Dow plunged 176 to 8317. Volume surged to 1.7 billion shares on the NYSE, and 1.94 billion on the Nasdaq. Decliners led 17 to 14 on the NYSE, and 17 to 15 on the Nasdaq. Downside volume was 60% on the NYSE, and 60% on the Nasdaq.

After the close, Amazon slipped despite better than expected results. Emulex , SunGard , Electronic Arts and BMC beat estimates; TriQuint , VeriSign and Flextronics matched estimates; JDS , MicroStrategy and missed; and Digital Insight warned.

During the day, Expedia , Foundry , LSI Logic and AOL surged on their earnings reports.

Genesis Microchip fell 22% despite better than expected results. ESS also fell on its report, while Digital River rose slightly.

Microsoft fell 3.7% on antitrust concerns.

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.

The second distribution day in three days, a sign that the rally is on shaky ground here. The Dow (first chart) and S&P (second chart) are both clinging to their May downtrend line breakouts, but not by much. A down day tomorrow would just about do those lines in, particularly since the indexes would close below them on a weekly basis. Michigan consumer sentiment at 9:45 a.m. and home sales data at 10 a.m. tomorrow could decide whether those lines hold or not. That said, we’re not sure the indicators suggest anything more than a pullback here. The equity put-call ratio hasn’t had a single close below .50 in this rally, let alone under .40-.45, as we saw numerous times in August, and the VIX, the options volatility index, remains much higher than it was in August (see third chart below). It is also interesting to note that the weekly stochastics on the Dow and S&P charts remain below the level of previous tops, indicating more upside potential for this rally. And the internals today held up well, including a slight improvement in the new high/new low list. That said, the short-term picture is definitely weak here, especially considering the ‘dark cloud cover’ that formed on the Nasdaq today, a gap up that then retraced more than half of yesterday’s gains (see fourth chart below). 1267 is possible support on the Nasdaq, and 1220 is critical.





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