Market Analysis for Sep 24th, 2003

All to the Downside
By Mike Paulenoff,

If yesterday was a very frustrating trading day, today is a lot less frustrating.

All of my work indicated that we were going to get a countertrend or rebound rally yesterday off the decline that occurred from late last week's high in the indices into Monday's low. Yes, we did get that yesterday, but the way it unfolded in such an uneven and tricky way extending right into the closing bell made the entire trading day in terms of both the analysis and the trading a very frustrating affair.

But the one thing my work kept telling me was that the rally didn't exhibit the characteristics that would extend and take off but a rally that was destined to fail. Sure enough, it's been all to the downside today since right near the opening bell.

The sell-off came despite good news yesterday evening from Cisco (CSCO), which announced it was increasing its buyback program to $20 billion from $13 billion. That's perceived to be good news if a company is devoting more of its cash to buying back its own stock.

Well, as fate would have it that turned out to be the good news to sell on. The market tanked, and actually so has Cisco. It peaked at 21.48 this morning, and at 1:30 Eastern time is now trading at 20.72, so it's down 76 cents from its high. Cisco looks like it's in a bit of trouble, as do the indices.

The indices after having broken this past Monday's lows during today's trading are now quickly approaching the critical September 12 pivot lows. The September 12 lows in the E-Mini S&P were 1005.25. Right now as we speak we're trading at approximately 1010.11.

As far as Nasdaq is concerned, it broke Monday's lows this morning at 1359.50, and the September 11 low in the case of the Nasdaq December E-Mini is 1330. Right now we're at 1354. However, by all accounts, after a bit of consolidation and sideways movement perhaps in the early afternoon, I think the market will close weak.

One more point about the way the indices are trading: Keep in mind we're coming into the final few days of trading for the month of September and for the quarter. This has been a very strong quarter for stock prices. Wouldn't it be ironic if the last few days turned out to be a bit of a washout on the downside and retraced a lot of that money that's been earlier in the quarter.

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