CISCO AND MOTOROLA PULL TECHNOLOGY LOWER-- IBM WEIGHS ON DOW WHILE P&G GAINS -- NASDAQ 100 LEADS MARKET LOWER

CISCO HELPS DRAG NASDAQ LOWER... Because of its large size, Cisco has an important influence on the Nasdaq market. Recently, that influence has been to the downside. Chart 1 shows the big networker tumbling to the lowest level in two months -- and on rising volume. That puts the stock dangerously close to a new 52-week low. Its falling relative strength line (versus the Nasdaq Composite) shows that Cisco wasn't much help to the Nasdaq during the fourth quarter rally. The fact that the Cisco/Nasdaq ratio line has fallen to a new low suggests that Cisco us now hurting the Nasdaq. And, when the Nasdaq is weakening, that's not good for the rest of the market either. Cisco wasn't the only big technology loser today. Other notable losers were Intel, Microsoft, and Qualcomm. Chart 2 shows QCOM breaking its moving average line on the heaviest volume in months. Over on the big board, Motorola was a big technology loser.

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MOTOROLA TUMBLES ON BIG VOLUME ... Motorola tumbled 7% today on the heaviest volume since last spring. That's a bearish combination. Its daily chart shows the stock having failed a test of last spring's high at 18.5 during December (see circles). Since then, it's been all downhill. Today's selling pushed the stock beneath its 50-day average and has put its 200-day line in jeopardy. Notice the deterioration in its relative strength line as well. No doubt the heavy selling in Motorola contributed to a weak day in technology which was the day's weakest sector.

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IBM DRAGS DOW LOWER, P&G JUMPS... Nowhere is the latest market rotation out of technology, and into consumer staples, more evident that in today's Dow action. One of the Dow's weakest stocks was IBM which fell to the lowest level in two months. Big Blue is trading well beneath its 50-day average. Its relative strength line, which peaked in early December, is now falling as well. In the meantime, the Dow's strongest stock was Procter & Gamble. Chart 5 shows that consumer staple leader gaining ground today on rising volume. Its relative strength line has turned higher since the start of the new year. Right now, consumer staples is where most of the scared money is going. Some of it is also moving into energy. With the market falling today, all market sectors lost ground. The biggest loser was technology. The smallest losers were energy and consumer staples. Please see my earlier message on why that's not a good sign for the market (January 19, 2005).

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NASDAQ 100 LEADS MARKET LOWER... The Nasdaq 100 Index had today's biggest percentage drop (-1.77% versus -.95% for the S&P 500 and -.84% for the Dow). Chart 6 shows the Nasdaq 100 Shares (QQQQ) falling today on rising volume. Its inability to climb back over its (blue) 50-day average is a negative sign. [The Dow and the S&P 500 closed back under their 50-day lines today]. The QQQQ/S&P ratio, which peaked more than a month ago, continues to drop. It's pretty tough for the market to mount a serious rally when technology is leading it lower.

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