IBM SPARKS TECH DECLINE -- NASDAQ LEADS MARKET LOWER --DOW NEARING RETEST OF 9,000 SUPPORT

IBM LEADS DOW LOWER... Last night, IBM reported solid earnings. Today, the stock fell heavily on big volume. That's what happens when the market builds in expectations that are unrealistically high. The big selloff in IBM that started in overnight trading set a gloomy tone in the entire technology sector today. For the first time in awhile, technology was the day's weakest sector. That's reflected in heavier Nasdaq losses. Chart 1 shows IBM gapping below its 50-day moving average this morning on rising volume. That failure suggests that Big Blue will probably retest its June low and/ or its 200-day line near 80. Chart 2 shows that IBM was unable to rise above chart resistance near 90. It's heavy volume decline during the first week of June should have been warning of trouble ahead. IBM was also the Dow's biggest loser today.

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BIGGEST NASDAQ LOSERS... The Nasdaq 100 was the day's biggest percentage loser. Three of the biggest percentage losers in the NDX are shown below. They're not pretty pictures. All three fell sharply to break moving average lines. QLogic did so on very strong volume. It also broke broke support along its June low. JDS Uniphase did the same. Tellabs also broke its 200-day moving average line.

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CAPITAL ONE LEADS FINANCIALS LOWER... After technology, financials were the day's top loser. A large part of the reason was due to Capital One. That financial stocks tumbled today on huge volume. Although it made back half of its earlier losses, COF still ended below its 50-day line.

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NOKIA COLLAPSES... Nokia was another big casualty today. The chart tells the sorry tale. The stock plunged to a three month low on monster volume. It also broke major moving average support. The daily chart also shows that Nokia failed to exceed the highs from late last year. That made it a market laggard.

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CATERPILLAR TESTING 1999 HIGH... Caterpillar was a standout performer today -- even in the face of a down market. CAT was the top gainer in the Dow. Its weekly chart shows CAT breaking through the early-2002 highs to register a bullish breakout. It also did so on strong volume. Its monthly bar, however, shows that CAT is nearing another potential chart barrier at its 1999 high at 65.

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DOW BEARING DOWN ON 9,000...NASDAQ WEAKENS... The Dow lost another 43 points today to end near 9050. A retest of the 9,000 level appears likely. More important is a possible test of its 50-day average. Most of the real selling today was in the Nasdaq 100, which lost 36 points. The NDX undercut minor support at last week's low and could be headed back toward its 50-day line as well. The daily stochastic lines have turned negative from overbought territory over 80. The daily MACD lines (which failed to confirm the recent move to new high in price) are close to turning negative.

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