The Nasdaq Composite closed above 2000 yesterday, but -- aside from the numerology-fixated media -- that level matters little, if it matters at all.
As numbers go, Nasdaq 2000 has taken on prominent stature in the media these days. But market prognosticators say the fixation is bunk. Looking at the Nasdaq's trendline, which is used to chart the direction of the index and can be drawn by connecting its highs and lows over a period of time, they see nothing significant about the number: It's neither a support nor a resistance level.
"2000 may have some psychological importance, because people talk about it and write about it," said Frank Gretz, market analyst at
, a brokerage firm in New York. "But if you look at the charts, it hasn't meant a whole lot. It isn't a level that has stopped a decline or started a rally."
So, why so much fuss? In a Thursday
Wall Street Journal
article, "For Nasdaq, 2000 is the New Magic Number," Larry Lawler, head of trading at
, said. "People are seeing 2000 as a level that they are trying to feed off of. The ability of the market to get back to 2000 and then rally off of it is a definite positive." (Lawler was out of the office today and couldn't immediately be reached for comment.)
Nasdaq by the Numbers
Technicians disagree. "It is not exactly a magic number," said Richard Dickson, technical analyst at
. Dickson has tracked the Nasdaq's downward trendline, uncovering its support level (where it tends to stop falling) and its resistance level (where it tends to stop rising).
He says the Nasdaq has been on a downward trend since closing at 4206 Aug. 31, and that it now finds support at 1973, a level hit on June 20 and its lowest point since late April. But it encounters resistance at 2264, a number it reached on June 7 at the peak of the recovery and off the April 4 low of 1638.8.
Other technicians look at gaps in the chart, where one day's trading range doesn't overlap with the next day's trading range. Gap prices, technicians say, are good support and resistance levels. Peter Green, market analyst at
Gerard Klauer Mattison
, said he sees support on the Nasdaq at 1941, a level that hasn't been reached since April 17. He finds there is support at 2121, another gap on the chart that was last filled on June 13.
"The fact that we closed above 2000 makes it less meaningful as a resistance level," said Green.
"I don't know why the media is talking about 2000," said Philip Roth, chief technical analyst at
. On the downside, he says the Nasdaq finds support between 1650 and 1700 and it hits a ceiling between 2300 and 2350. "I don't think we'll go zooming to either of those levels, but they will contain the market for the next couple of months."
In the end, N2K will mean about as much as Y2K.