Friday, April 28, 2006

Not With a Bang, But a Whimper

Microsoft was the big headline-grabber today, losing about 11% of its market cap, its worst loss since 2000. Back in April of 2000, a Microsoft bombshell started to blow the NASDAQ apart. No such luck today - the NASDAQ fell only about 1%.

Remember MicroStrategy (MSTR) executive Michael Saylor? He's the outspoken CEO of the firm who, in March 2000, pledged $100 million to a free, online university (nothing ever came of the pledge). MSTR at one point lost over 99% of its stock value, although it's recovered to be down "only" 97% these days.

Take a look at this graph, and note in particular today's drop (this doesn't even capture the magnitude of the drop, since I took the snapshot intraday, when the stock wasn't down as much):

What's interesting here is - - once again! - - the trendline. Notice how it "jumped" to the other side, just like a dog jumping over a fence. So now this trendline has magically changed from support to resistance. It's particularly interesting since today's high exactly touches the underbelly of the trendline.

This "pooping out" of stocks is what I'm seeing more and more of. You can look at LEH, GS, CME - - all kinds of examples. So it's not like suddenly the market is crashing. But individual stocks are engaged in quiet trend shifts (as discussed yesterday) from broadly up to broadly down.

It all starts with one good down day. Here is Cummins (CMI) today as a fine example:

This kind of shift is very subtle, but from my observations, once a stock has had a "mini crash" like this, it creates a very different attitude toward the stock from the investing public, and you will often see it begin steadily eroding instead of building - so "higher highs, higher lows" changes into "lower highs, lower lows."

See you on Monday!


Hurricane5 said...

I do not agree that CME, GS, and LEH are "pooping out" with a trend shift "broadly down". I have said this before and will say it again. There are no interstates in this business. Stocks do not go on a straight path. Their are left and right turns to make, as well as stops to fuel up. That is why we can not look at a stock on a day-to-day basis. We have to look at the long term.

CME: 9% off 52 week high. 145% off 52 week low.
GS: 6% off 52 week high. 70% off 52 week low.
LEH: 4% off 52 week high. 75% off 52 week low.

Mantra said...

I don't think you can say GS is "pooping" until you see volume on break of 152.50-150.

TR said...

WOW, CME down, that whole sector down. BEN / LM - suedo sector support WAY DOWN!