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If you're looking for what caused the recent drop in Internet stocks, there are a handful of plausible reasons.

But it depends on to whom you are talking. Some blame the IPO glut, others the seasonal weakness in tech stocks. And another group sees ominous signs in the weakening fortunes of online brokerages.

The recent trend is down. The Internet Sector

index fell about 3.9% Tuesday, magnifying a 1.4% drop in the

Nasdaq Composite Index

. The techie Nasdaq is down 7.1% since its intraday high July 6 -- but the DOT index has slid more than 24% since then, and 37% since its mid-April peak.

One stock market veteran says he sees a bubble bursting. "I've been watching this game for 40 years and this is one of those times," says Harvey Baraban, a stock trader and a teacher of technical analysis courses on the West Coast. "We have had an overdose of questionable new Internet issues, and investors have spread their money over too many issues and diluted the impact of the top players." Baraban says this dilution will continue to impact top Internet plays such as





. "There are no leaders anymore, and that's what makes me think this could be the big shake-out."

One buy-side Internet analyst in New York, speaking on condition of anonymity, professes relief at the weakness in stocks, saying that recent IPOs have brought progressively weaker Internet companies to market. "I think we need this to stop, because it is getting out of hand," the analyst says. "The stuff is getting really bad, I think."

Others, including Rob Martin, Internet analyst with

Friedman Billings Ramsey

, blame seasonal weakness, now that the second-quarter earnings season has passed. "August is perceived as being weak from a catalyst standpoint," says Martin. "The absence of positive catalysts, as opposed to the potential for negative catalysts, is really what's driving this market more than anything." In other words, no good news is bad news.

Ken Schapiro, president of

Condor Capital

, agrees. He sees that the

S&P 500

is following last summer's pattern of a July peak, followed by a drop, then sideways movement. "The Internet stocks are the highfliers," Schapiro says, "and they're usually the ones who get whacked first."

Online brokers were hit especially hard

Tuesday following a pessimistic report on trading volume from

Credit Suisse First Boston

analyst Bill Burnham. The report is especially negative for Net stocks

Online brokerage customers invest in technology and especially Internet stocks says Stephen Franco, Internet analyst at

US Bancorp Piper Jaffray

. "If those stocks are no longer going up, people aren't making money, and if people aren't making money, they trade less." That, in turn, means that first-time investors who might want to jump on the gravy train instead hold back, he explains.

It's a stock glut issue, too, Franco says. "There has been an incredible supply of new Internet stocks in the past three or four months. Before that there was a demand imbalance," he says. "Now there is a supply imbalance."

One question facing investors is whether the recent Internet weakness is a precursor to a wider selloff among technology stocks, similar to what happened following the Internet decline this past spring. The pattern could repeat itself, says one tech stock watcher. "I know this is a scary way of putting it, but Internet stocks are clearly the bellwethers of this tech growth market, so when they fall, we all fall," says George Moriarty of

Private Equity Week

, a technology IPO newsletter. "It's hard to go public when you have all this hanging over your head."

The question for investors is whether this downward cycle is the big Internet shake-out, or just a lull before the market bounces back again.

Although Internet stocks are getting rocked, short-sellers still aren't quite ready to pounce. Bill Fleckenstein, who runs

Fleckenstein Capital

and is one of the more voluble market shorts, says these Internet plays aren't shortable because "the confidence in them hasn't been shattered."

Fleckenstein, who isn't short Internet stocks, says that past Internet downturns have always been saved by something. "If investors don't get saved by Friday's unemployment rate, then maybe it won't be business as usual next week," he says.

-- Eric Moskowitz and Caroline Humer contributed to this story.