Reversing Wednesday's pattern, the afternoon was unkind to stocks on Thursday. If the evaporation of early gains and modest midday declines were not terribly disturbing to those long stocks, the acceleration of selling in the final two hours of trading may have been.
After trading as high as 8558.63 early on, the
Dow Jones Industrial Average
closed down 2.1% to 8317.34, with the bulk of the decline coming after 2 p.m. EDT. Following similar patterns, the
closed down 1.5% to 882.50 vs. its early best of 902.94 while the
lost 1.6% to 1298.70 after having traded as high as 1331.
Volume of about 1.7 billion shares in both Big Board and over-the-counter trading was up from yesterday's levels. Declining stocks bested advancers 17 to 14 in
New York Stock Exchange
activity and by 17 to 15 in
The inverse relationship between stocks and Treasuries continued Thursday. The price of the benchmark 10-year note rose 30/32 to 102 2/32, its yield falling to 4.11% despite a lower-than-expected report on weekly jobless claims.
was the largest drag among Dow components, down 2.8% in sympathy with
, which fell 9.3%. Dow Chemical reported disappointing third-quarter results and lowered guidance for the fourth quarter while a West Virginia jury found its Union Carbide unit liable for asbestos-related illnesses suffered by workers from 1945 to 1980.
The jury ruling sparked weakness in a number of other firms with potential asbestos liabilities, including
, down 6.8%;
, which lost 3.6%; and
, which dipped 3.4%.
, against which some asbestos claims have been filed, fell 6.1% despite posting better-than-expected earnings. Its decline was most likely due to a Morgan Stanley downgrade and weak revenue growth from advertising giant
and a Lehman Brothers downgrade of rival
, which slid 6.7%.
Elsewhere, shares of
fell 3.3% as some sell-side analysts raised concerns about a scheduled speech about GE Capital by Ravi Suria of Duquesne Capital. However, Suria's appearance at the
Grant's Interest Rate Observer
conference in New York was canceled, apparently due to the amount of attention generated in anticipation. (Strange days, indeed.)
The decline in those more staid businesses could also be explained by investors' ongoing desire for higher beta, or more volatile names, as discussed
here. The trend was best embodied today by
, which soared 14.3% despite some
lackluster fourth-quarter guidance.
However, early outperformance by the Comp and Philadelphia Stock Exchange Semiconductor Index evaporated in the afternoon swoon. The SOX ended down 2.6% to 278.50 after trading as high as 299.18.
Earlier Thursday, this column examined, and offered a rebuttal to, some of the common reasons cited for the recent rally in tech shares.
Our Charts Runneth Over
That the S&P, Comp and SOX failed to hold above round numbers of 900, 1300 and 300, respectively, is potentially significant, as is the fact the Dow petered out at roughly the same place as on Monday, right near 8550.
Ike Iossif, president of Aegean Capital in Chino Hills, Calif., and one of
top-ranked market timers, observed that the real key technical battle today was fought around 875 on the S&P 500. That the index -- which traded as low as 879 -- held above that key near-term support level is constructive for optimists, but bears "got what they needed to claim victory for today," Iossif suggested.
That declaration, and the market's overall action, was in stark contrast to the prevailing message from presenters at the Technical Securities Analysts Association of San Francisco's annual conference here on Thursday.
John Bollinger, president of Bollinger Capital Management in Manhattan Beach, Calif., spent much of his presentation discussing the differences between expansion (bull markets) and contraction (bear markets). Bollinger is convinced we are mostly definitely in a contraction phase, and one that will last well into the next decade.
But the period will be characterized by multiple intermediate-term bottoms and subsequent rallies, a process the technician believes began Oct. 9. "All told, we think a bottom is in place, and though the road will be bumpy, the path of least resistance for stocks is higher well into next year," he wrote in the most recent edition of his
Capital Growth Letter
On a separate but related note, there has been a lot of talk lately about seasonal factors now being in the market's favor. Traditionally, Nov. 1 through April 1 has been the seasonally strongest time to own shares. Seemingly jumping the gun on its own timing indicator,
The Stock Trader's Almanac
announced on Oct. 2 its "six-month seasonal buy call" was triggered with the Dow at 7755.61.
Additionally, stocks generally fare well after midterm elections as, thereafter, presidents often "jiggle fiscal policies to get federal spending, disposable income and Social Security benefits up and interest rates and inflation down
so by Election Day he will have danced his way into the wallets and hearts of the electorate," according to
The Stock Trader's Almanac.
(Of course, every election cycle is different, and this year's midterm elections will be more crucial than most in determining which party dictates the agenda for the next two years.)
Finally, after the TSAA Conference yesterday I had a chance to chat with Martin Pring, author of
Technical Analysis Explained
, considered by many to be the seminal work on the topic, and current editor of
The InterMarket Review
, among other newsletters.
Pring, who does not seek the limelight but is widely respected by other technicians, believes an "important bottom" was formed on Oct. 9, and that the ensuing rally could last from three to six months. However, he is closely watching the quality of the action, particularly how the market acts on setbacks such as Thursday's, before making a further determination.
The veteran technician also observed that the inflation/deflation indicators he watches are at crucial junctures, and that the next three to four weeks will be "very important" in determining their trends.
I hope to follow up with Pring in the coming days and will, of course, report here if successful.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.