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Dow Down

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The initial euphoria of the semiconductor book-to-bill ratio has worn off, and stocks waffling in and out of positive territory. Semiconductors, bitoechs, and networking are the strongest tech sectors, but are off their highs. Oil and oil service stocks remain today's strongest sectors.

Dow Jones Industrial Daily Chart

Yesterday's the Dow closed at 10,174, and is bouncing in and out of positive territory today. Should the selling pressure increase, 10,120 offers the last point of support before we have to start talking about the psychological 10,000 level. Just below at 9,970, the Dow might find some more solid support. This 61.8% retracement level is also the top of the April double bottom pattern. Should the Dow try to move higher, 10,236 should be initial resistance. Microsoft (MSFT) will play a part in which level gets tested first.

Microsoft Daily Chart

$64 looked like critical support for Microsoft, and the stock has dropped 6% since losing that level. On the way down Microsoft has taken out the 200-day moving average, and the 50% retracement of the March to June gains. Now the stock is testing the 61.8% retracement level, which is also the top of Microsoft's double bottom pattern. Since Microsoft is a component of both the Dow and Nasdaq-100, holding above $59 would help the indices to hold their current levels.

Jeffrey Canavan
Assistant Analyst

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