Nasdaq experiences single worst daily point drop--down 26% for week--analysts predict further dropgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
The Nasdaq dropped 355 points on Friday, Dow lost 616, S&P lost 84 Biggest daily point drops for all three indices:
Friday April 14 3:59 PM ET
Technicians See Further Damage in Nasdaq
By Cia Frey
CHICAGO (Reuters) - Technical analysts surveyed the bloodbath in the Nasdaq composite index (^IXIC - news) Friday as key support levels were once again easily violated.
The 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.
Shortly before the close of trading, the index was down 407.45 points to 3,269.33 after a larger-than-expected rise in the March U.S. consumer price index sent the equity market reeling.
Nasdaq traders said that after four straight aggressive losses this week, the strong inflation data was the nail in the coffin.
``From an Elliott Wave perspective, I can count an important and lasting top in place for the big board averages,'' said Steve Porter, North American equity and stock index analyst at Elliott Wave International.
Porter said that according to his trading band parameters, a meaningful top was six or seven months overdue. A top is signaled when the market gets 6 or 7 percent above the bands and relative strength on a weekly or monthly basis is above 80 percent.
``I have to realistically say that the damage we are seeing now is too much damage to come back from,'' Porter said. Porter said the market 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.
Porter also expressed concern that margin calls on Monday will start next week off with an even more negative tone.
The Nasdaq 100 cash index (^NDX - news) also fell 11 percent Friday to the session low of 3,138.42. The index has spiraled 33 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 to 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 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 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.
-- Carl Jenkins (Somewherepress@aol.com), April 14, 2000