Stocks plunged on Tuesday after the Federal Reserve cut short-term interest rates by 50 basis points and left open the possibility of an intermeeting rate cut. But traders had hoped for a 75 basis point cut.
The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 13 to 210, and the Nasdaq plunged 93 to 1857. The S&P 500 lost 28 to 1142, and the Dow plummeted 238 to 9720. Volume rose to 1.23 billion shares on the NYSE, and 2.01 billion on the Nasdaq. Decliners led 17 to 13 on the NYSE, and 12 to 13 on the Nasdaq. 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.
Leading stocks were hard hit. Juniper fell 6 3/16 to 52 1/4, and Cisco
dropped 1 11/16 to 19 1/8.
Ariba lost 1 1/16 to 10 5/16, i2
dropped 2 1/8 to 16 1/4, Commerce One
declined 1.07 to 9.35, and PurchasePro
lost 1 7/32 to 7 1/2.
Check Point lost 4 13/16 to 51 5/8. Openwave
fell 4.01 to 23.49.
Yahoo fell 1 to 13 15/16 despite a content deal with Verizon Wireless.
Lehman Brothers cut price targets but maintained Strong Buy ratings on Palm , off 3/4 to 13 9/16, and Handspring
, down 1 1/16 to 16 1/2. Lehman said Palm may be seeing a slowdown this month, but that Handspring appears to be on track.
GoAmerica rose 5/32 to 3 9/32 on an alliance with Research In Motion
, which fell 4.79 to 24.71 despite a deal with Lucent
.
Net2Phone slipped 3/16 to 8 1/2 despite better than expected numbers. EXFO
, up 2 1/8 to 25 3/8, beat estimates by 4 cents with 14-cent earnings.
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
Two Important Notes: The Midday report will no longer be published, effective today, but the Market Close will continue to be published daily. Also, the technical commentary will not be published for the next two weeks, until Monday, April 2. We will try to update important levels as they change at the AfterHoursTrading.com link above. We apologize for any inconvenience and wish you well in this turbulent market.
Important Levels to Hold: 1125 on the S&P 500; 1847-1850 on the Nasdaq (declining at 7.5-10 points per day); 1600 on the Nasdaq 100 (declining at 9 points per day); and 9650 on the Dow.
The bears are not too far from taking control of this market again. The Nasdaq held its lower bullish falling wedge trendline at 1857 today (first chart), but hit it on high volume on a steep sell-off; not a terribly good sign if the index is going to hold that line, which will be at 1847-1850 tomorrow. The Nasdaq 100 also has a clear lower wedge trendline forming (second chart), and is probably the more important support, since it is a much cleaner line; that line will be at 1600 tomorrow, and is declining at 9 points per day. The Nasdaq is also holding above pretty stubborn resistance from mid-1998 in the 1850-1870 range (third chart), so that could add to support in this range. The next support level below 1850 would likely be 1750-1770. The Nasdaq 100 still has a broken bear flag in play (fourth chart), with downside potential to about 1400 if it can’t get back above 1800 soon. The Nasdaq needs to clear 2028, the July 1998 high, fill a down gap at 2042-2053, and get back above 2070, the redrawn 1990 logarithmic trendline. That last level would probably also take out the upper boundary of that falling wedge, which would be a bullish development. This market needs to reverse by Friday, or it could be headed for 8300 on the Dow, 1000 on the S&P 500, and 1350 on the Nasdaq. This is the most aggressive Fed rate-cutting in 19 years, but the market is saying it’s not enough. The treasury yield curve remains inverted at the low end, indicating that interest rates are still too high (a condition the Federal Reserve may wish to heed in the future, because it gave an early warning about the state of the economy six months ago, and has been unerringly accurate over the last 40 years). The market seems to be more worried about deflation than inflation, and given falling commodity prices and the steepest decline in personal net worth in the 56 years that the statistic has been tracked, we tend to concur with that concern.
The most important support for the whole market, in our opinion, is 1125 on the S&P 500 (see chart below). That was a tough resistance level from mid-1998, and we can’t see another strong support on the S&P 500 until 1000, so the S&P must hold that level. The index broke support around 1150 today, and it may be headed for a bout with 1125 support. To the upside, there is resistance at 1160, 1171, 1191 (the July 1998 high) and 1198. The index must take out 1214-1215 to be restored to technical health, a level that marked the index’s recent breakdown.
The Dow is so far staying within its two-year trading range, a range it would depart with a break below 9650. But last week’s action was just plain ugly, and the index had its lowest weekly close in two years. And today it closed at a new daily closing low, another warning sign. Below 9650, the next support is 9350 and then 9200. To the upside, 10,000 is first resistance, then 10,100 and 10,200, but the Dow must get back above 10,300 to be restored to technical health.
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.
