An Important Market Milestone
Take the past three years’ phenomenal gains in technology
and erase 71%. That’s where we stand, revisiting the low close the Nasdaq 100
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made on April 4. As we have been suggesting for months in this column, the
tech-laden Nasdaq indices had head-and-shoulder topping patterns and descending
triangle patterns that indicated they could undercut the spring lows.
Now the market is at another decision point as it
sits at the pivot of an inverted cup-and-handle formation. Statistical
analysis of cup-and-handle patterns indicate the mean move of such a pattern
is 15% from their pivot. This projects a downside target into the 1162 range
for the Nasdaq 100, if the bearish environment remains intact. On the
bullish side, many traders could find the NDX, Nasdaq Composite and component
stocks irresistible should the Nasdaq drop into triple digits.
Today’s market is down following the release of the
National Association of Purchasing Managers non-manufacturing report. The
report came in at a four-year low, the lowest since the statistic has been
tracked. Traders are comparing the report with the NAPM manufacturing report
just a few days ago and determining that such a poor showing in services will
have a negative reciprocal effect on manufacturing. Non-manufactured
“services” account for about four-fifths of economic activity, and the
thinking goes that dreariness in the service sector will not provide the income
and demand to rev-up the manufacturing sector.
The weekly employment picture only augmented this view as
today’s report on jobless claims remained above 400,000 and showed there
is a nine-year high in the number of individuals receiving unemployment
benefits. Fewer services mean less demand for manufactured goods and fewer jobs
for both. And more layoffs only reduce the demand for both products and
services.
The overall effect is the perception of a weakening
economy, rather than a possible economic bottoming. And with earnings
pre-announcement season upon us, the market is also looking at more quarters
of potentially poor corporate earnings results.
For instance, it is feared that Manugistic’s
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poor showing today may be a precursor of what may come in the
pre-announcements. Analysts had expected a gain in quarterly earnings from
the enterprise software provider, but the firm said it anticipates a loss.
Traders punished MANU with as much as a 50% shave of its share price, but
the stock is recovering to a level that is down 3.58 at 7.38.
Fear that chip giant Intel
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disappointing news after the close is also weighing on technology and the
broad market. Intel is probing lower in the hours before the
pre-announcement and is trading at its lowest level since April, down 1.07 at
26.39.
In the “If you liked IT at $250, why wouldn’t
you like at $10″ department, famed Internet bull Holly Becker issued a
buy recommendation on Yahoo!
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night, a 40-month low. The stock got an initial pop from her bullish call
but nearly took out yesterday’s low. The stock is now up .21 at 10.86.
The Nasdaq 100
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the S&P 500 is down 21.40 at 1110.10, and the Dow is down 177 at 9856.
Only the oil service sector
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up 1.88%.