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By Sam Collins of InvestorPlace

Two more shock waves hit the stock market yesterday when the initial jobless claims came in higher than expected and a key tech stock issued a lower-than-expected revenue forecast. The result was a third straight day of losses and heightened concerns over a double-dip recession.

The initial jobless claims for the week ending Aug. 7 totaled 484,000 vs. an expected 465,000. It was the highest weekly claims count since February. On top of that, eurozone industrial production fell. And before that,


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issued a revenue forecast that fell far short of analysts' expectations, so technology stocks opened sharply lower and closed down 1.7%.

The top seven decliners in the S&P 500 were all technology stocks:

Cisco : -9.44%

NetApp : - 8.75%

Juniper Networks : -6.9%

Altera Corporation : -6.1%

Xilinx : -5%

Hewlett-Packard : -1.42%

Microsoft : -1.17%.

Many floor traders voiced pessimism over the near-term future of stocks with one saying, "The market's playing a waiting game now. There'll be continuing hesitation before investors do much buying." (

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While stocks fell, the U.S. dollar rose, climbing 0.3% versus a basket of currencies. It was the fourth straight gain for the greenback, which is up 2.6% in just a week.

At the close, the Dow Jones Industrial Average was off 59 points at 10,320, the S&P 500 fell 6 points to 1,084, and the Nasdaq lost 18 points to 2,190.

The NYSE traded 1 billion shares with decliners over advancers by 1.4-to-1. The Nasdaq crossed 622 million shares, and decliners there were ahead by 1.5-to-1.

Crude oil for September delivery fell $2.28 to $75.74 on the weak economic outlook. The

Energy Select Sector SPDR

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fell 32 cents to $53.44.

December gold rose $17.50 to $1,216.70 an ounce, and the

PHLX Gold/Silver Sector Index


rose 3.42 points to 174.14.

What the Markets Are Saying

The S&P 500 surprised many yesterday by opening on a gap down through its 50-day moving average. That was bad enough, but the Nasdaq's second gap down in a row (first was through its 50-day moving average on Wednesday) with a low that immediately challenged the July 20 low at 2,160, was startling. For a few moments it looked like the market was getting out of control and could even launch a freak meltdown. But by 10:15 a.m., cooler heads prevailed, and the index rallied off of its low and settled in at a range of 2,183 to 2,197 for the remainder of the session.

As for the Dow, it may be the strongest of the three most-watched indices, but even it fell through support at its 200-day moving average, finally bouncing from its 50-day moving average at 10,265. Another thrust down through its 50-day and the well-established support line at 10,235 could cause real trouble for the Dow, since the next support is at the multiple low points just below 9,800, and a new bear market confirmation.

The cautionary signal by the internal market indicators was correct last week when it showed that the market was grossly overbought. And this week the sentiment numbers came around after being neutral for weeks. The AAII survey this week not only reported a higher bullish percent than the week before (39.76% versus 30.39%), but reported the lowest bearish sentiment reading (30.12%) in over three months. And the other important reverse indicator, the Advisors Sentiment reported by Investors Intelligence showed a huge drop in the number of bears, as the bulls moved to 41.7% from the early July low of 32.6%. It was their fourth consecutive week of increasingly bullish readings.

Wednesday's liquidations with a nasty follow-through on Thursday have caused some serious technical damage. In less than a week, the bear has resurfaced with more vigor than ever, resulting in a reverse for the near-term trend to down, the intermediate to neutral but heading toward down, and the long-term trend is down.

We may get an oversold bounce today, but don't chase it. The bear is on the prowl.

Dow Theory Lesson: Bear Markets

Like bull markets, bear markets can usually be characterized by three phases. The first is the "distribution" phase, which usually starts in the latter stage of the bull market's "blow-off" phase. This phase starts with the "smart" investors (institutions and insiders) recognizing that a bubble in prices exists with price-to-earnings ratios well above average historical highs. As prices go higher and higher, the smart investors scale in their sales and are out of the market when the top is reached. Volume in this phase is usually high, but in its final days the tip-off is that volume begins to decline on up days and advance on down days.

The second phase is one of "panic." Buyers thin out and sellers become more urgent as a downward spiral in prices suddenly accelerates into an almost vertical drop, and volume reaches climactic proportions. After the second phase, it is not unusual to have a long secondary rally that slowly grinds to a low-volume phase that introduces the final selloff.

The final phase is characterized by sellers who held on through the panic and are now resigned to the fact that prices will head even lower. Business news is now deteriorating rapidly and the penny stocks that had doubled and tripled have now lost all of their gains with many going out of business. Blue chips are still falling, although at a slower rate, but then even they are thrown out with everything else in a final crescendo of selling.

The bear market ends when everything in the way of possible bad news has been discounted and the public never wants to own stocks again.

Not all bear and bull markets are alike, and individual markets may even lack one of the phases mentioned. Also, there is no time estimate for either type of markets. However, since 1950, most bull markets have lasted for three to five years, and bear markets have been as short as three months and as long as three years.