| Technical Levels : So the markets continue to look relatively ugly. In our last update, we pointed to the importance of Dow support at 9,000 and the implications of a failure to hold that level on the close. The key point went something to the effect of -- 'If the index should fail to hold 9,000 on a closing basis, that may be the trigger for those reaction lows -- the panic selling or capitulation -- that so many technicians are seeking.' Well as it turns out, the index did fail to hold support at 9,000, and it has indeed sold off hard. Last week, the Dow put in its fourth largest weekly point loss, dropping 695 points or 7.4% to finish the week at 8,684. With both the Nasdaq and the S&P 500 already at five-year lows, many would contend the sell pressure on the Dow is no significant surprise. In the current market, nothing is truly a 'surprise' but it's worth noting the Dow had traded essentially flat over the prior four years. A comparison of the Dow and the Nasdaq on the four-year chart points to the Internet-driven bubble on the Nasdaq, as well as the Dow's lack of participation to the upside. So while the Dow may have some work to do carving out a bottom, don't look for it to lose 75% of its value as the Nasdaq has. A look at the four-year chart on the Dow (without the comparison to the Nasdaq), points to a few areas technicians will be watching. Points of interest going back to September 2001 include support in the broad range of 8,567 to 8,605, followed by more modest support at 8,357 to 8,376 and a more important floor at the September 21st closing low of 8,235. It's also probably worth noting that the intraday low on September 21st was 7,927 which suggests a test of support in the 8,000 area is not entirely out of the question. -- Mike Ashbaugh, Briefing.com |
