U.S. Market Leadership Changes In A Day

U.S. stocks reopened Monday after the longest shutdown since the Great Depression, and in a single trading day, the investing landscape shifted dramatically, as former leaders plunged and former laggards soared.

The ISDEX http://www.wsrn.com/apps/ISDEX/ plunged 13 to 131, and the Nasdaq fell 115 to 1579. The S&P 500 dropped 53 to 1038, and the Dow plummeted 684 to 8920, its biggest point loss ever and its lowest close since November 13, 1998. Volume soared to a record 2.36 billion shares on the NYSE, and 2.25 billion on the Nasdaq. Decliners led 27 to 6 on the NYSE, and 32 to 8 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.

The Federal Reserve cut interest rates by 50 basis points in a move to boost the market, and continued to pump massive liquidity into the financial system. World central banks followed with their own rate cuts in a coordinated global move. The market operated for the first time under restrictions authorized after the 1987 market crash – and stocks still fell.

Stocks with airline exposure, such as United Technologies and Boeing , plunged. American Airlines parent AMR and United Airlines parent UAL each lost about 40%. Defense stocks like Lockheed Martin , Raytheon , Northrup Grumman , and L-3 soared.

The same theme – out with travel, in with defense and security – was on the minds of tech investors.

Priceline , Expedia , Travelocity , and Hotel Reservations Network plunged.

But anything to do with security held up well, and in some cases soared. OSI Systems , Invision , Mercury Computer , Visionics , ICTS , Magal , and Visage posted stunning gains.

RSA Security gained, but Israel-based Check Point fell.

Video conferencing stocks Polycom and Picturetel gained. The two are merging. WebEx , ACT , Wire One and Mcsi also rose.

Nokia rose on speculation that cell phone use will increase, and EMC found buyers on a projected increased need for data storage and recovery.

Some technical comments on the market: Note: We include 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

Not a lot to like today, frankly. For all the controls in place, for all the calls for a patriotic rally, the market’s performance today was abysmal. It goes to show you that the big money still follows the bottom line, and small investors still have little power to move the market. The internals today – extremely negative – were actually hopeful, because they revealed substantial capitulation. The options put-call ratio and volatility index were very high, both real pluses. However, the TRIN – the NYSE measure of buying pressure – was far too low for a bottom, showing the perils of blatant market manipulation; the Fed inadvertently may have prevented a substantial bottom from forming today. Important economically sensitive sectors like Transports, cyclicals and semiconductors fell off a cliff. And support was broken everywhere. Some potential supports: The Dow (first two charts) has significant support at 8600-8800, and then at 8200-8300. 9100-9400 is now first resistance. The S&P (second chart) doesn’t have another strong support until 980, and below that 923. 1057 is first resistance. The Nasdaq (third chart) could find some support in the 1500-1540 area, and then 1419-1430. First resistance on the Nasdaq is 1620, then 1700 and then 1770. A rally could come as soon as tomorrow, but this sure looks like a market with more downside work ahead of it.

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.

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