Reply #99: Commentary: Nasdaq breaks several key support levels

[UpInArms]

http://www.marketwatch.com/news/story.asp?guid=%7BC6D4A43F%2DFBE3%2D45E0%2D9809%2D609BC5B3BE6F%7D&siteid=mktw

NEW YORK (MarketWatch) -- Simply speaking, the outlook for the Nasdaq Composite's chart is no longer optimistic.

That's because the technology rich index has done what it couldn't do in three previous attempts -- break through significant technical and psychological support at 1,970.

But that's not all.

There were a number of other technical indicators that converged to make the 1,970 to 1,990 level a very important area for bulls to defend. But after several tests, bulls were finally overrun.

In late afternoon trading on Thursday, the Nasdaq ($COMPQ: news, chart, profile) was down 21 points at a 6-month low of 1,954.

And momentum has now swung decidedly in the bears' direction.

<snip>

What made the 1,970 level so significant was it marked the 50% retracement level of the rally off the Aug. 13, 2004 low of 1,750 to the Jan. 3 high of 2,191. That move may have lasted only 4 1/2-months, but it was critical for bulls, because it saved the dire-looking Nasdaq from posting a losing 2004, and injected some optimism by taking it up to a 3 1/2-year high. See interactive java chart.

The initial test of that level occurred on March. 9, when the index hit a low of 1,968, and bulls passed with flying colors. The Nasdaq bounced slightly to close at 1,973, then took off on a 32-point, or 1.6-percent jaunt the next day.

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