! We pick on you a lot, but can you please shut up already about 10% corrections in the
Yes, 10% is the standard definition for a market correction. But
us if we are wrong, but you have to throw out the book on typical things when you're dealing with an index that was up 85.6% last year and at one point this year was up more than 25%. Granted, the Nasdaq has bounced after falling 10% from its highs previously this year, and we would expect some buying if the index drops 10% as it appears to be doing this time around. But to keep harping about 10% is just plain irresponsible.
There, the sermon is over. But other than 10%, how can you tell how low things will go? Technicals, my friend, technicals. Our good friend Bob Dickey, director of technical research with
Dain Rauscher Wessels
, said the rule of thumb he uses is the correction will be 50% of the previous upleg. So, for the Nasdaq, the numbers he is using are 2700 from October of last year to 5100 made earlier this month, or 2400 points. So, if you take 50% of 2400 you get 1200 (apologies for the simple math), then subtract that from 5100 and you come up with 3900, or a 24% correction from the highs.
But don't bet on 3900 yet. Dickey also said that the Nasdaq would need to break through the 4500 level to indicate that a double top around 5000 was official and indicate a trip to at least 4000 was forthcoming. It closed down 189.21, or 3.9%, at 4644.68. And just fyi, 10% of 5100 comes in at 4590.
Today's losses were blamed on the 1-2 punch of the portfolio
Abby Joseph Cohen
that is no longer overweighted with technology stocks, and
negative comments on Internet stocks from
Manager Mark Mobius. Panic selling ensued and left the sector in a tenuous position.
TheStreet.com Internet Sector
index closed down 93.01, or 7.6%, at 1124.08. Dickey said the drop below 1150 would lead to a test of 1000. Trade in the Dot was certainly technical today. It originally found support ahead of the recent low from March 21 of 1142.22, and the 1135.31 low from March 16 before those levels gave way late. Some other recent lows include 1060.84 from Feb. 22 and 1007.00 from Jan. 31.
Losses were steep and covered all cross-sections of the Net sector. Among the more painful declines,
Check Point Software
closed down 40 3/4, or 20.6%, at 157 1/2.
ended off 39, or 18%, at 179 1/2.
tumbled 29 7/8, or 15%, to 170.
finished down 25 3/4, or 16%, at 135 1/2.
Among more traditional Net names,
ended down 24 13/16, or 11%, at 199.
finished down 22 5/8, or 11%, at 181.
dropped 23, or 11%, to 182.
slid 17 15/16, or 9%, to 177 1/16.
A couple of stocks actually had news behind their moves as well.
closed down 1 9/16, or 31%, at 3 1/2 after accounting firm
reported in CDNow's annual report that it had "substantial doubt about its ability to continue as a going concern."
was able to hold a 3 3/8, or 10% gain to 37 11/16 on news that
would take more
control over the provider of broadband access.