Sure, you could argue that the
brief dip below 2000 this morning didn't really matter. Start caring about millennial marks in stock indices, and the next thing you know we'll be putting on funny hats, singing and eating cakes every time we take another trip around the sun.
But on Thursday, it seemed like many traders were using the drop in the Nasdaq 100 -- the basis for the popular Nasdaq 100 unit trust, or QQQ -- as a buy signal. The index spent less than a half hour below the 2000 mark before rebounding. For its part, the broader and more widely followed
dropped to 2185 Thursday before rallying back above 2200. At midday, the Nasdaq 100 was off 40, or 2%, to 2018.
Ridiculous though it may be, the truth is that the big numbers can have a serious psychological effect on the market. Hence the
Dow Jones Industrial Average
has had a persistent problem with 11,000 since the fall, piercing through the mark several times but never managing to stay above it at the close. Similarly, on the way down, such levels can provide support, as many investors cue off them as entry points into the market -- the "if
ever hits 30, I'm buying" crowd.
For a market already in a deep funk, technical analysts reckon it's important that the Nasdaq 100 stay above 2000. "These round numbers tend to offer some pretty good psychological support," says Richard Dickson, technical analyst at
Scott & Stringfellow
. Below 2000 on the Nasdaq 100, and the market will look to 1900, he says. "Break that, we're talking about 1500."
Others don't believe that things are so dire. Although the drop below 2000 "adds to what has already turned into a dicey situation,"
First Union Securities
chief technical analyst Greg Nie says that the market is deeply oversold and set for a rebound and cautions that selling this late in the game may be the wrong thing.
"The better decision here," says Nie, "is endurance."