Stan, any disagreements with this article's assessment?
Technicians See Further Damage in Nasdaq
4/14/2000
Filed at 5:29 p.m. ET
By Reuters
CHICAGO (Reuters) - Technical analysts surveyed the bloodbath in the Nasdaq composite index (.IXIC) on Friday as the market once again easily violated key support levels.
For the near term, analysts are not ready to say the carnage is over, but some are beginning to say the top is in place.
Steve Porter, North American equity and stock index analyst at Elliott Wave International, said the Nasdaq composite was testing key support at 3,335.00 to 3,230.00, which represents two sets of Fibonacci retracements and a major upward sloping trendline drawn off the October 1998 lows.
``If we take those levels out, it is going to signal a lasting and important peak. If they can't rally the troops at that level in the Nasdaq, then just kiss it goodbye,' Porter said.
``For me on the Dow, I officially turned bearish when the Dow made a marginal new high on Wednesday and then reversed,' he added.
``That was enough to me from an Elliott Wave perspective that I can count an important and lasting top is in place for the Big Board averages. The action that we have seen over the past couple of days is pretty well confirming that, and I think the run-up in stocks is pretty much done.
``I have to realistically say that the damage we are seeing now is too much damage to come back from,' Porter said.
Porter also expressed concern that margin calls on Monday will start next week off with an even more negative tone.
The Nasdaq composite index fell more than 10 percent Friday, 26 percent on the week, and 35 percent from its record March 23 close at 5,048.62.
At Friday's close, the index was down 355.61 points or 9.67 percent to 3,321.17 after a larger-than-expected rise in the March U.S. consumer price index released Friday morning sent the equity market reeling.
Nasdaq traders said the strong inflation data was the nail in the coffin after four straight days of aggressive losses this week.
The Nasdaq 100 cash index (.NDX) also fell 11 percent Friday to a session low of 3,138.42 before closing 9.73 percent lower at 3,207.96. The index has dropped more than 30 percent from its March 24 record high close of 4,691.61.
Hans Kashyap, president of Analytics Research Corp., said Friday's break in the Nasdaq 100 below the 3,349.06 to 3,314.75 lows from January accelerated the selling effort and shows technical damage.
``The break under both of these lows from January projects down to next support at 2,964.11, the lows made November 30, and potentially all the way to the next major support down around 2,610.00,' Kashyap said.
The latter represents the upside breakout for the Nasdaq 100 in October 1999 after basing for about a year.
The 2,610.00 level also represents about a 75 percent retracement of the entire run-up from the low of May 1999 near 1,960 to the March 24 all-time high of 4,816.35 as well as a 45 percent correction from the highs.
However, Kashyap still sees this sharp pullback as a corrective move from the highs as long as the market stabilizes above the April 1999 lows near the 1,950.00 level.
``At this point the market really, especially the Nasdaq, has come too far too fast, and this is actually longer-term positive as I see it for the market,' Kashyap said.
Kashyap is looking for the market to stabilize in the near term at the 2,610.00 to 3,000.00 level.
``I don't think we are going to go much below it, and then we are going to have another strong run up to the 4,000.00 level. Then I think we are going to see some more sideways action so that the market can catch its breath,' Kashyap said.
Analysts are now preparing the market for a potential 50-basis-point-rate hike at the May Federal Open Market Committee meeting.
``The market will want to see if there are any further interest rate hikes after May 16 and then traders, once they are comfortable with the stability of the interest rate scenario, will start buying it up again,' Kashyap said.
nytimes.com
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I remember Elliot Prechter(sic) and the Elliot Wave Theory from the 1980's. I think he missed the bull market in the late 1980's and 1990's. The 50 point basis hike in May isn't going to help if true.
Jack |
