When we spoke with Elaine Yager at Herzog Heine Geduld on Tuesday this week about the Nasdaq trading down to the 3583 level, we had no idea it would happen so quickly. After all, the Nasdaq was trading right around 4030 at the time. But after a disastrous day that concluded a disastrous week, that 3583 level is less than 100 points away and was only 60 points away at one point today.

The Nasdaq ended the day down 179.23 points, or 4.7%, at 3663.00. It traded as low as 3642.28.

TheStreet.com Internet Sector

index finished down 35.72, or 4.9%, at 699.17, ending below the 700 level for the first time this year. The reason that technicians are targeting the 3583 level in the Nasdaq is that there is a gap left from June 1 when the Nasdaq closed at 3583 and opened at 3729 on June 2. Technicians often want to "clean up" a chart by having a gap such as that one filled in.

This morning's strong economic

data just added to the negative sentiment the market has seen much of the week. And while it may be too strong to call it "panic selling," the selling did intensify and snowball after a brief move to the upside failed. Compounding the problem was that few traders were willing to stand in front of the snowball.

We clicked over to our sister Web site

RealMoney.com

to give those on the free site a little glimpse of what you can get if you pay a small amount of money. Our own hedge fund guru,

James Cramer

, a perennial bull, wasn't liking the prospects for next week as well, in part because of supply.

"With 50 deals on tap next week -- that's right, 50 -- and with insiders being able to sell because the window is open after earnings, we are looking at more supply than we have had any time since March," writes Cramer. "We don't have the cash to take it all down ('we' meaning the market) so we don't want to play the bounce. Call us bearish? Call us whatever you want. We don't like the risk reward here."

And lest you think this is some kind of operation where all bow down to the fearless leader, our own technical analyst

Gary B. Smith

takes a light-hearted shot at Cramer, writing, "Ah, so Crameroonie is almost bearish? Well, as bearish as he's going to get anyway. And everyone else is down in the dumps right? So, time to buy?"

Smith answers his own question, writing, "Nah, not yet. But, maybe at least time to cover those shorts if you haven't yet. Remember, the market

never

goes straight up ... or straight down. In any event, 3735 (the gap up 'low') just might be support. If so, then the market might thrash around for the next few days before it gets better. But, if it closes below 3735, then it could get messy."

Few areas of the tech sector were spared. Among traditional plays,

Yahoo!

(YHOO)

closed down 7 5/16, or 5.5%, at 126 3/4.

Amazon.com

(AMZN) - Get Report

concluded a disastrous week down 1 1/4, or 4%, at 30 1/8. It began the week around 41, meaning it lost more than 25% of its value. Also,

Inktomi

(INKT)

fell 7 13/16, or 7%, at 100 1/2.

Among the other casualties,

InterNap

(INAP) - Get Report

closed down 6 3/16, or 17%, at 30 7/8;

VerticalNet

(VERT)

ended down 5 7/16, or 11%, at 42 5/8;

BEA Systems

(BEAS)

ended down 5 5/16, or 11%, at 43 1/2; and

Check Point Software

(CHKP) - Get Report

dropped 12 5/16, or 10%, at 107 3/8.

Looking for a bright spot? Online advertising firms were mostly positive after the

Federal Trade Commission

signed an agreement yesterday to set privacy standards for advertising networks. Among them,

DoubleClick

(DCLK)

closed up 2 13/16, or 8%, at 36 7/8;

Engage Technologies

(ENGA)

finished up 1 5/32, or 12.5%, at 10 7/16; and

24/7 Media

(TFSM)

closed up 13/16, or 7%, at 11 15/16.

2:05 P.M.: Ladenburg Strategist Sees Nasdaq Falling to 3560, Then 2780

Yeah, the market sucks. Deal with it. Go short if you're tired of getting your butt kicked by being long.

The

Nasdaq was down 112, or 2.9%, to 3730 in recent trading.

TheStreet.com Internet Sector

index was down 25, or 3.4%, to 710. Strong economic

data this morning just compounded the weakening sentiment in the market and sellers emerged after the market initially opened higher.

Frenkel Calls

When we last

spoke with our good friend (but not a relation, as some messed-up reader once

suggested),

Ladenburg Thalmann

market strategist Steve Frenkel, we asked him to call us the next time he changed his forecast. Last night, Frenkel made the call. Frenkel, who previously in this space said that he saw the Nasdaq pushing to the 4861 level, is now negative on the market, and targeting 3560 on the downside.

Frenkel said he made the change after the Nasdaq closed below its 200-day moving average yesterday for the first time since June 1. The 200-day average was at 3872 yesterday.

Frenkel said another factor that made him change his forecast was that a number of stocks that he was long, including

Foundry Networks

(FDRY)

,

RF Micro Devices

(RFMD)

and

Vignette

(VIGN)

, turned in what he said were "fantastic" earnings reports but "were trashed" post-numbers. In other words, trading down after good news is not a bullish signal.

Below-Average Performance
Nasdaq Composite Index vs. 200-day moving average, six months

This morning, Frenkel said that although he was targeting 3583 on the downside, filling in a gap left from June 1 to June 2, the Nasdaq may have bottomed after penetrating the gap after trading below 3729. The gap was created when the Nasdaq closed at 3583 on June 1 and opened at 3729 on June 2. Technicians often want to "clean up" a chart by having a gap such as that one filled in. We first

mentioned this gap earlier in the week with the Nasdaq trading around 4030.

Regardless of whether the Nasdaq does fill in the gap completely, Frenkel said he expects the Nasdaq to bounce back to the 4000 area and that is when he would go short. Frenkel said his downside target is the same 2780 level he had back in

June and he expects the Nasdaq to reach that level by October.

10:43 A.M.: Steamy Economic Data Leave Tech Stocks Soaked

Forget about the dog days of summer. This week has been one big bow-wow fest. Technology shares showed some bark early today, but shorts were nipping at the market's heels.

The

Nasdaq was down 100, or 2.6%, to 3742 in recent trading.

TheStreet.com Internet Sector

index, the

DOT, was down 30, or 4.1%, to 705.

The market was not helped by this morning's preliminary second-quarter

gross domestic product

report, which showed the U.S. economy grew at a 5.2% rate, significantly faster than the 3.8% forecast by economists. Helping soften the blow was a reported slowdown in consumer spending to 3.0% from 7.6% in the first quarter and a downward revision in first-quarter GDP to 4.8% from 5.5%. Treasuries have weakened on the numbers, suggesting increased concerns that the

Federal Reserve could raise interest rates again next month.

Among stocks in the news, online advertising firm

DoubleClick

(DCLK)

was up 4.6% and

Engage Technologies

(ENGA)

was up 2.4%. Gains came after the

Federal Trade Commission

signed an agreement yesterday to set privacy standards for advertising networks.

According to analyst Rich Petersen at

Credit Suisse First Boston

, the new standards represent his "best-case scenario" for advertising networks, allowing them to their original business plans and market opportunities.

"We think this largely takes the privacy issue off the table for eMarketing stocks," writes Petersen. "Uncertainty about privacy has been a major overhang for these stocks, now there is clarity on the issue. Further, the standards are industry friendly. So, we think this is a major long-term positive for these stocks." Credit Suisse First Boston has not done underwriting for either DoubleClick or Engage.

Alteon WebSystems

(ATON)

was down 11.5% on news that it would be acquired by

Nortel Networks

(NT)

in an all-stock deal valued at $7.8 billion. Nortel was down 8%.

According to terms of the deal, Alteon shareholders will receive 1.83 Nortel shares for each share of Alteon they own. Based on Nortel's closing price of 78 1/2 yesterday, Alteon shares were worth a little more than 143, or just about where they were trading yesterday. As Nortel's price has slipped today, so has Alteon's.

A couple of downgrades were moving some stocks as well.

EarthLink

(ELNK)

was down 12.1%.

ING Barings

downgraded the Internet Service Provider to buy from strong buy, while

Morgan Stanley Dean Witter

downgraded it to neutral from strong buy.

ING Barings analyst Youssef Squali indicated that the downgrade was due to slowing subscriber growth and a "tougher environment" for dial-up access in general. He also lowered his 12-month price target to 20 from 50. EarthLink reported a second-quarter loss of 29 cents, which was better than the

First Call/Thomson Financial

estimate of a 36-cent loss but worse than Squali's 23-cent loss estimate. He also pointed out that the addition of 111,000 customers by EarthLink was substantially lower than his 190,000 estimate. EarthLink added 180,000 customers in the quarter, but roughly 70,000 came through its purchase of

InfoNet

.

Squali does have some positives to say about EarthLink, indicating it is one of the companies "best positioned" in the digital subscriber line market. However, he indicates that slower growth in dial-up customers combined with low profit margins in DSL today "are likely to dampen investors¿ interest in EarthLink and in the group in the short term."

Also,

Goldman Sachs

analyst Anthony Noto downgraded

eToys

(ETYS)

to market outperformer from trading buy. It was down 3.1%. The downgrade must have been particularly difficult for Noto as he has been an unabashed

supporter of eToys since Goldman helped bring the company public last year.