The good news from one technical analyst about Internet stocks: They have the best-looking charts of all the issues in the technology sector. The bad news: The rest of the tech sector looks pretty bad and could eventually take the Net sector down with it.
Weakness in the broader market certainly has influenced Net stocks over the past few weeks, and it contributed to losses again today.
TheStreet.com Internet Sector
index, or DOT, closed down 0.26 to 647.12 today. For the week, the DOT was up 29.51, or 4.8%.
Weak overseas markets, a downgrade of
, some cautionary words from
and strong economic data that hurt Treasuries conspired to punish the market. The start of the fourth quarter and the
dreaded month of October, along with some hesitation ahead of next Tuesday's
meeting, also contributed to the roughness.
Dick Dickson, a technical analyst with
Scott & Stringfellow
, said the
has held up better than the broader market, but he eventually expects technology stocks to play catch-up with the
. He said price action in the Dow today was typical of what has been occurring of late -- no follow-through and "the path of least resistance is clearly down." Dickson said October is typically the month when there is a "waterfall selloff," and there has been nothing to indicate that won't happen again this year.
Though Net stocks are a bright spot in an otherwise ugly picture, Dickson said the Net sector cannot hold up by itself if the rest of the technology issues are under pressure. Because the tech sector has been outperforming, once it does capitulate, it could be the catalyst for a market washout that has been seen in many of the recent Octobers, he said. "But if I'm wrong about the market and tech stocks, then the Internet sector will have further to run because
Net stocks have the best charts," he said.
There are a couple of key levels in the DOT that bear watching, according to Dickson. The first is 600, a level the index keyed on as it was rallying from its August lows and one that now represents support. The index slipped below 600 last Friday, trading as low as 598.61, but quickly righted itself and closed at 617.61. Dickson's other level is 572, its 200-day moving average. Dickson said he would be concerned if the index dropped below 600, but below 572 would indicate a reversal and would suggest deeper losses.
Among individual stocks today, there were few announcements for Net enthusiasts to digest.
closed up 3 1/8, or 8%, at 44 9/16 after
said it was considering strategic options relating to its 58% interest in Excite@Home. AT&T said it had not forged any definitive deals, but alliances between Excite@Home and
have been speculated.
Yahoo! closed down 4 1/16, or 2%, at 175 7/16; AOL closed up 3 3/4, or 4%, at 107 13/16; Microsoft finished down 19/32, or 1%, at 89 31/32; and AT&T finished down 1 7/8, or 4%, at 41 5/8.