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Technical Analysis: The Dow Falls Below Major Support
The blue chips need to recover quickly here.
September 17, 2008
By Paul Shread:

http://www.internetnews.com/bus-news/article.php/3772296

The Dow (first chart below) fell below major support today, making a quick recovery of 10,683-10,827 essential here. If not, the next major support looks like 9700, although 10,000 is obvious round number support.

The Dow's quick recovery is important here because except for a few breaches in 1947-1949, the midterm election year low has held for four years in every election cycle since 1934. An early breach suggests an ineffective response to economic stimulus, a sign of potential economic turbulence ahead.

Today was the sixth 90% downside volume day on the NYSE since June and fourth this month, the most intense string of selling the stock market has seen since the 1974 lows and the third most intense bout of selling in the last 48 years, lagging only 1974 and 1962. But as we've said repeatedly, it's not a bottom until confirmed by a 90% upside day. What the catalyst will be for that remains to be seen, but at some point credit risk will be judged to be diminished.

The S&P's (second chart) next support levels are 1136, 1100 and 1060, while 1200-1219 is a very big first resistance area.

The Nasdaq's (third chart) next obvious support is 2000, and 2155-2200 is tough first resistance.

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http://www.internetnews.com/bus-news/article.php/3772291

Stocks Plummet on AIG Rescue
VMware and Nortel were two of the tech sector's biggest losers on a historic day for the stock market.

September 17, 2008
By Paul Shread:

Stocks plunged to multi-year lows Wednesday after the U.S. government's historic bailout of AIG (NYSE: AIG) did nothing to calm a growing financial panic.

AIG's inability to raise funds led to what appears to be the first failure of a Dow company in the index's 112-year history. The government's decision that an AIG bankruptcy could be catastrophic for financial markets underscored just how much danger lies in the highly leveraged and unregulated debt instruments at the heart of the crisis.

Whether Thursday can provide any relief remains to be seen, as the SEC will reinstate short-selling limits and Washington Mutual (NYSE: WM) and Morgan Stanley (NYSE: MS) are reportedly in merger talks.

With credit markets seized up in a way not seen since the crash of 1987, officials like Fed Chairman Ben Bernanke, a long-time student of the causes of the Great Depression, and Treasury Secretary Henry Paulson are scrambling to provide markets with the credit and liquidity needed to ease the crisis. One idea being floated is for a fund like the Resolution Trust Fund set up to cope with the Savings and Loans crisis of the 1980s. And with the kind of terms the government squeezed out of AIG, the government could eventually wind up making money on the crisis.

A number of tech names suffered equally in Wednesday's decline. Nortel (NYSE: NT) plunged 49% on a warning, and VMware (NYSE: VMW) lost nearly 13% on a downgrade.

SanDisk (NASDAQ: SNDK) was a rare winner, soaring on a takeover offer from Samsung.

Adobe (NASDAQ: ADBE) shares lost 5% despite beating estimates. Oracle (NASDAQ: ORCL) and Palm (NASDAQ: PALM) will report their quarterly results late Thursday.

Apple (NASDAQ: AAPL) lost 8.6% and Google (NASDAQ: GOOG) fell 6.4% despite a green technology deal with GE (NYSE: GE).

The Nasdaq plunged 109 to 2098, the S&P fell 57 to 1156, and the Dow lost 449 to 10,609. Volume declined to 9.4 billion shares on the NYSE, and 3.16 billion on the Nasdaq. Decliners led by a 30-2 margin on the NYSE, and 25-4 on the Nasdaq. Downside volume was 95% on the NYSE, and 85% on the Nasdaq. New highs-new lows were 12-1017 on the NYSE, and 29-425 on the Nasdaq.