Stocks Plunge On EDS Warning

Warnings from EDS and Morgan Stanley sent stocks plunging on Thursday.

The Nasdaq lost 35 to 1216, just 24 points above its July low, the S&P 500 dropped 26 to 843, and the Dow fell 230 to 7942. Volume was unchanged at 1.47 billion shares on the NYSE, and declined to 1.52 billion on the Nasdaq. Decliners led 25 to 7 on the NYSE, and 24 to 10 on the Nasdaq.

After the close, Qualcomm rose on a bullish chip forecast. Jabil , Tibco and Tektronix topped estimates, 3Com missed revenue estimates, and Powerwave warned.

During the day, EDS plunged 52% on a dramatic warning, dragging IBM and Computer Sciences to new 52-week lows.

Intel hit a new 52-week low.

EMC slipped to a new 52-week low despite positive analyst comments.

Sun fell 10% to a new low on a downgrade.

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.

Three straight equity put-call ratio closes above 1.0. A rarity, and should be good for a bounce soon. One possible target to watch is 7850-7875 on the Dow, which could complete a third wave down on that index (see first chart below). That possible Elliott wave scenario would target a small bounce soon, likely no higher than 8200-8250 in the Dow, and then down for the traditional October low. The banks (second chart) continue their free fall. 670 is the minimum downside target there, and it looks like the banks should have no problem getting there. The Nasdaq (third chart) is right above the lows at 1192-1206; if that level breaks, 1175 is a possible next target. Today was a 90% downside volume day for the techs, the kind of capitulation we need to see more of on both the Nasdaq and the NYSE, which did not have a 90% downside day today. 1250-1270 should now be tough resistance for the Nasdaq. The S&P (fourth chart) has support at 830-833, 814 and 775-800. 870-875 should now be tough resistance. The SOX (fifth chart), the semiconductor index, has pretty good support around here. Below 243, 220 would be the next likely target.






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