Worries about the health of Japanese banks sent stocks plunging on Wednesday.
The ISDEX http://www.wsrn.com/apps/ISDEX/
fell 8 to 232, and the Nasdaq lost 39 to 1974. The S&P 500 dropped 30 to 1166, and the Dow plunged 300 to 9990 after ratings firm Fitch questioned the financial health of 19 Japanese banks. Volume was unchanged at 606 million shares on the NYSE, but rose to 1.02 billion on the Nasdaq. Decliners led advancers 21 to 7 on the NYSE, and 24 to 10 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.
Technology and Internet stocks showed some strength, and a few leaders traded higher. Check Point
tacked on 1/4 to 70 5/16. JDS Uniphase
added 7/8 to 25 5/16 on rumors of a contract win from Nortel
rose 11/16 to 59 5/16. The company came in first in a test of core routers recently, and Cisco
came in second. A Cisco press release claiming that Cisco had won the test served to remind traders of Juniper’s win, since the company and sponsor of the test both called on Cisco to correct the press release. Cisco
lost 1 1/4 to 20 1/8. Cisco CEO John Chambers said yesterday that some other than Cisco may dominate the space, a comments traders took to mean Juniper, which has been stealing market share from Cisco.
rose 1/4 to 15 3/8 on new of a mobile offering with Yahoo
, which lost 13/16 to 15 1/4.
Stronger than expected earnings didn’t help Comverse
, which lost 4 7/8 to 65 1/8 on a Goldman Sachs downgrade based on valuation concerns. Openwave
lost 1.26 to 30.20.
fell 11/32 to 5 23/32 despite a three-year deal with ABN Amro.
AOL Time Warner
lost .65 to 40.05 despite positive comments from Merrill Lynch.
slipped 17/32 to 3 3/8 on a revenue warning.
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As we said yesterday, until the Dow gets back above 10,300, the S&P 500 above 1215, and the Nasdaq above 2070, any rally will be little more than a retest of recent breakdowns. That said, we’re seeing some positive signs in the Nasdaq here, if nowhere else at the moment. If the Nasdaq can close above 1948.56, we will have the opposite of what we had at 2200-2250 last week: a higher close than the open, indicating some buying pressure. The index formed a small gap at 1924-1930 on the open yesterday that acted as support today; that could be another good sign for techs if that gap doesn’t fill by Friday. The Nasdaq held the lower trendline of what could be a bullish falling wedge (first chart) yesterday, with the lower line touching on the December and January closing lows; that lower line is declining at 5 points or so a day, so we’ll place it at 1912 for today and 1907 for tomorrow. A break below 1890 would negate that pattern. The next strong support on the index is at about 1850-1870 (second chart). As we’ve been saying for two days, the last couple of down days looked like potential exhaustion gaps, meaning sellers could be running out of steam. To the upside, the Nasdaq needs to
get back above 2070, the redrawn 1990 logarithmic trendline. After that, the upper boundary of that falling wedge is around 2100, and next resistance after that is 2252. If the Nasdaq can take out that upper wedge boundary and close above 2252, a bottom is likely in, and the index could be headed for about 2900, the point where the upper trendline on the wedge began.
The S&P 500 is back below 1191, the July 1998 high, and 1171, yesterday’s low, and doesn’t have another strong support on the charts until 1125. To the upside, the index must take out 1214-1215, an important level that marked the index’s recent breakdown.
The Dow broke critical support at 10,300 yesterday, and has taken out a lot of support since then. Next supports are 9850, then 9650, 9350 and 9200. To the upside, the index must get back above 10,300. After 10,300, 10,450-10,500 is next resistance, and then 10,600-10,700. The Transports are getting crushed again, a big negative because of their importance to the health of the economy as a whole, but the Dow is becoming very oversold and is due for a bounce in the next day or two.
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