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IBM Taking Down the Dow

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The spree of earning warnings is taking its toll on the markets today. The Nasdaq is down 57, the S&P 500 is lower by 20, and the Dow is off 154. The Dow is being hurt by big cap technology names like IBM, Microsoft, and Intel.

IBM Point and Figure Chart

Last week we hinted that IBM was consolidating and could control the fate of the Dow. If that is in fact the case, it doesn't look good. Today's $3.85 drop has given a quadruple bottom sell signal on big blue's point and figure chart. Without any nearby support, IBM could be on its way down to test the bullish support line at 104. Coincidently, that is also the 38.2% retracement level and 200-dma on the bar chart (not shown).

Dow Point and Figure Chart

The Dow has also suffered some key damage to its point and figure chart. 10,400 was the home of the bullish support line and the bearish price objective. By losing that support level, it has given a spread triple bottom sell signal. Now that our bearish price objective has been exceeded, one creative thing we can do is move over to the next column of Os to try to find a downside target. This gives us a downside target of 10,150. That level roughly corresponds to a 50% retracement of the Dow's April to May gains.

Jeff Canavan
Assistant Analyst

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