Leaders Pounded As Sell-Off Continues
BY DAVID SAITO-CHUNG
INVESTOR'S BUSINESS DAILY
Taser International, (TASR) NovAtel, (NGPS) Travelzoo (TZOO) and other small, highly speculative stocks tumbled at the start of the year. On Thursday, it was the big-cap leaders' turn.
EBay, (EBAY) a poster child of the Nasdaq's strong recovery in 2003, took its biggest dive in years as the market continued to show no sign of rebounding soon.
A day after shaving its full-year earnings target, the global online auction site gapped down 19% Thursday on the heaviest volume in more than a year. The market leader trumpeted a sell signal Jan. 6 when it pierced through its 50-day moving average on heavy trade. Meanwhile, wireless tech leader Qualcomm (QCOM) tumbled to its 200-day on huge volume after it too reduced forecasts.
The Nasdaq gapped lower as well, falling 1.3% to a three-month low. The Nasdaq 100 did worse, falling 2% — further evidence that Thursday's selling was concentrated in large-cap techs.
Volume surged above the previous day's levels from the get-go, then slowed to a minimal increase.
The S&P 500 dropped 0.8%, but it too gapped below Wednesday's intraday low. On Tuesday, the large-cap index rebounded above its 50-day moving average. The NYSE composite lost 0.7%.
NYSE volume also grew as the market chalked up yet another day of distribution. Although the indexes remained less than 10% off their 52-week highs, make no mistake: Stocks are in correction mode. Any new buy in this environment carries higher-than-average risk. Although cutting losses at 7%-8% on each trade is the golden rule, far better is to avoid any loss at all.
Some sectors have held up better than techs — namely utilities, oil and medicals. But some non-Nasdaq leaders continued to melt from the recent heavy selling. Chicago Mercantile Exchange, (CME) with more than a hundred mutual funds owning shares, slipped 7.20 to 197.05. A day earlier, Doral Financial, (DRL) one of the best financial stocks in recent years, tumbled 11% on its biggest volume in years.
Not all of the major leading stocks have slumped as hard as eBay. Luxury retailer Coach, (COH) audio component supplier Harman International (HAR) and home builders Beazer Homes USA (BZH) and Toll Bros. (TOL) have held up well despite the nearly three-week slide this year.
F5 Networks (FFIV) ignored the crashing stocks around it, shooting ahead 6.06 to a high of 50.75 on five times normal volume.
Yet unless the market begins to show strong demand for stocks, it's best to sit in the stands. Don't try to be a hero in a falling market; only institutional investors as a whole can swing the market's direction from negative to positive.
The Philadelphia semiconductor index initially bucked the tech market's decline. Rambus' (RMBS) victory in its patent infringement lawsuit against Hynix Semiconductor spurred buying in the beaten-down sector.
But those gains reversed as the Sox closed down 0.8%.
