Not Good....
The Big Picture
Thursday, August 16, 2001
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Nasdaq Slides To Four-Month Low
Investor's Business Daily
A technology sell-off kicked the Nasdaq to its lowest close in four months Wednesday.
Weak profit outlooks from the likes of BEA Systems (BEAS) helped fuel the selling, which gained momentum in the late afternoon.
The Nasdaq closed near the low for the day and came within 3 points of last week’s low. It slid 2.3% to finish at 1918.89, its lowest level since April 16. The trading range that has contained the tech-heavy index in recent months is falling apart.
Wednesday’s weakness wasn’t that big of a surprise. As noted the day before, Tuesday’s decline came in heavier volume than the day before. One day of distribution, or professional selling, usually kills an attempted rally.
Indeed, big investors continued to unload shares Wednesday. As the Nasdaq fell, volume expanded 19% to 1.45 billion shares.
Where will it end? If you let the market guide your trading, that should largely be an academic question. Few stocks have broken out and even fewer have succeeded. Cash is probably your biggest investment.
Constructing price targets and scenarios that support them isn’t really worth your time. At some point, the Fed’s six (and perhaps seven and eight) rate cuts will jump-start the economy. Profits will hit bottom, setting up some easy comparisons.
But in all likelihood, the major market indexes will rally before an economic rebound becomes obvious. They are your primary indicators.
Leading stocks are also a key indicator. Not surprisingly, they’ve had a tough time in this market. AdvancePCS (ADVP) cleared a three-month base Monday. The pharmacy benefits manager churned in heavier volume Tuesday. On Wednesday, the stock dropped 2.46 to 66.26.
The Dow industrials, which lost 0.6%, and S&P 500, down 0.7%, avoided most of the Nasdaq’s troubles.
Still, the market’s overall performance worried option players, who hoisted the put/call ratio to 0.83. That’s the highest level in 3 1/2 weeks. The ratio rises when investors buy more bearish puts than bullish calls. They’re almost always wrong about the market, especially when it looks ugliest. Spikes above 1.0 have coincided — sometimes to the day — with major market bottoms.
Oil stocks rolled over months ago. The best performer among 12 subgroups, Oil & Gas-Refining/Marketing, ranks a measly 71st. Most rank anywhere from 127th to 195th in terms of six-month price progress. Yet these stocks got a boost Wednesday, in part from a Wall Street upgrade and data showing shrinking U.S. crude and gasoline inventories.
Weatherford International (WFT) jumped 3.79 to 39.26 on above-average volume. Like many other oil gear and drilling stocks, it’s still trying to build a bottom. Most oil stocks are trading 30% to 50% below their 52-week highs.
An exception is Quicksilver Resources (KWK), which barreled ahead 2.07 to 18.90 on five times usual volume. The Amex-listed stock had a huge run in 2000. It’s now working on a 12-week base and is 7% below its high of 20.50. Spinnaker Exploration (SKE), a member of the Oil & Gas-U.S. Exploration & Production industry group, gained 2.86 to 42.70 and stands 11% off its peak. |
