TODAY'S NEWS AND COMMENTARY
May 22, 2000
Mild gains may be in store for shares
By Julie Rannazzisi, CBS MarketWatch
Mild gains? Try severe losses...Weiss comments
NEW YORK (CBS.MW) -- The equity markets may get a lift at the open Monday following Friday's dismal performance, though buyers remain timid and conviction low.
The week started out well and ended ugly for the market, with sellers showing up in just about every sector by Friday.
While the breakdown in many technology leaders by the end of the week made many market observers nervous, the Nasdaq's ability to stay above key support levels gave others reason to believe that the current trading range will hold and that the April lows may be intact for now.
Terry Gabriel, technical analyst at IDEAglobal.com, observed that the Nasdaq's three-day decline this week was the third such episode since the mid-April market rout.
During each of these previous three-day declines, the Nasdaq has established higher lows. Whether this constructive trend remains intact this time around depends on Monday's price action, of course. So far so good, however, as the Nasdaq managed to close Friday above support at 3,367 -- the intra-day low set on May 10, which marked the conclusion of the previous three-day selling episode.
Further, Gabriel said many momentum stocks are establishing higher lows, another positive sign.
But the risk of piercing the lows of the year set in mid-April remains high. Should that happen, Gabriel said, the next leg down would be swift and violent.
"If we can hold support, we may [be able] to stabilize and dodge another bullet," Gabriel said.
"The market starts next week perched just above support on the Nasdaq. The week will answer the question of whether or not the Nasdaq is in a bottoming pattern, or beginning another leg to the downside," said Robert Dickey, chief technical analyst at Dain Rauscher Wessels.
"Holding and bouncing off this area for the next few days would be positive, and would increase the strength of the support level. The weaker action in some of the old-line tech stocks is a concern, but the Nasdaq is holding so far," he continued.
The Dow inched up 0.2 percent this week and is off 7.6 percent for the year.
On the week, the Nasdaq fell 3.9 percent and is down 16.7 percent for the year.
In early morning trading, the Nasdaq and the Dow are each struggling to keep their heads above a fragile support level. Because of a lack of economic indicator news to get investors in a selling frenzy, the indexes will likely bob up and down for the next few days. But, don't be surprised when they eventually sink to the bottom and drown.
The Nasdaq is headed into its fourth straight day of declines. The index faltered from the start, looking as if it had donned a pair of cement shoes. By mid-morning, the tech-heavy Nasdaq fell 213 points and wobbled up to 176 at noon. The Dow Jones Industrial Average quickly followed suit. Despite a timid rise in the very early hour, the Dow dropped 235 points by noon.
Clearly, the comments above hoped optimistically for a bounce at the open this morning, or, at least a wave of calm trading days. It didn't happen. This morning's events prove that, even without a 'catalyst', investors recognize a bear market when they see one... especially in technology stocks.
April Tech Wreck Brings May Repeat
Trading volume on the tech-heavy Nasdaq was fairly high this morning, with well over 750 million trades exchanged before noon. The Dow's trading volume was considerably less, with about 10 thousand trades executed by mid-morning. This does not bode well for tech stocks.
Investors are scurrying for the life boats when it comes to tech stocks; trying to salvage any profits that may be left. Most likely, though, they have just surrendered to losing their shirt in the most overvalued sector since the Dutch Tulip frenzy.