Option Investor
Market Wrap

NASDAQ Composite Below 1,500 For First Time Since 2003

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[Image 1]

Stocks continued their retreat from last week's Market Wrap and buyers showed little interest as another psychological benchmark, as well as a technical benchmark gets tested.

It would have to be a "chart of the week," perhaps my "chart of the month," a "chart of the year" and even a "chart of half decade" as the very broad NASDAQ Composite retraces 80.9% of its September 2002 low close to recent bull run highs.

Buyers put up little defense for the better part of the session with decliners outnumbering advancers notably from the opening tick.

Commodities, stocks, just about everything traded lower. The loan exception was Treasury prices, resulting in lower yield.

The Dow Industrial shed just more than 400-points with breadth negative at 29:1. General Motors (NYSE:GM) $3.08 +5.47% eased off of Tuesday's 52-week low as traders began to contemplate the increasingly likelihood of new Democratic leadership in Washington bailing out the troubled automaker.

Shares of Ford Motor (NYSE:F) $1.84 +2.22% also edged higher.

That's today's "good news" among the price action I saw.

NASDAQ Composite - Monthly Intervals [Image 2]

"NASDAQ 1,500" was a big psychological level of resistance during the Spring of 2003. A level that "would not be broken" to the upside during one of the great bear markets of our time, and after an historic run that for some reason ended in October 2007, the 1,500 level is traded yet again.

A technician could count the levels here and after each CLOSE below a level, the COMPX has NOT been able to close back above a level. That would be 1,816.52 as I see it currently.

Never say "never" and never say "always."

A good test for the 4-lettered faithful has been delivered in tonight's extended session with Intel (NASDAQ:INTC) $13.54 -2.79%, which was still holding its Oct'02 low of $12.95 was halted for trade, then released to trade as low as $12.36 in the extended session after the biggest maker of chips for personal computers warned that Q4 revenue would come in at $9 billion (+/- $300M), which was below the company's October forecast of $10.1 to $10.9 billion.

Adding to an extended session negative tone, Applied Materials (NASDAQ:AMAT) Chief Executive Mike Splinter said, "The last six weeks of turmoil in the financial markets is unprecedented. The weakening global economy will have significant impact" on all of the chip equipment maker's business.

Mr. Splinter's comments came after the world's largest chip equipment maker reported it recently completed Q4 earnings of $231 million, or $0.17/share.

Oil prices continued a torrid decline ahead of tomorrow's EIA inventory report, which was delayed one day due to yesterday's observance of Veteran's Day.

December Crude Oil futures (cl08z) - Daily Intervals [Image 3]

This is the same chart shown in my 10/22/08 Wrap. However, recent action now has the point and figure chart's bearish vertical count falling further to $50.00.

Global Economic Calendar - [Image 4]

Equities here in the U.S. accelerated losses when Treasury Secretary Paulson signaled readiness to enter the second phase of the $700 billion bailout/rescue, but that is unlikely to include the original proposal to buy up troubled assets. The Treasury is looking at ways to encourage private investors to return to the asset-backed securitization market. Barney Frank said some of the rescue package should be used to buy up troubled mortgages.

The White House again dismissed the use of TARP funds to aid the ailing auto sector.

Global Equities, Currencies, Oil, Gold, HUI.X, OIX.X ... [Image 5]

Mainland China's Shanghai Composite ($SSEC), which has been hardest hit year-to-day does show a gain since last Wednesday's close, but this looks like some "short covering" in what looks to be a more relative "oversold" global equity environment. That is, -64.66% YTD looks more "oversold" relative to other major benchmarks.

US Market Watch - 11/12/08 Close [Image 6]

New 52-week lows noted in red. At a MINIMUM, this suggests to me that SHORTS aren't as eager to cover positions, even under today's declines.

S&P 500 Index (SPX.X) - Daily Intervals [Image 7]

The S&P 500 (SPX.X) nears its 10/10/08 low, but if that's broken, then I'd have to assess further downside to the -11.8% retracement (same use of retracement as cl08z). Tough to try and "hang on" to longs here.

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