By Thomas Granahan

NEW YORK (Dow Jones)--Investors still skeptical of the importance of technical analysis in the stock market surely received a wake-up call Thursday.

Without a doubt, yesterday's sell-off brought the technicians to the forefront. A breakdown in the Dow Jones Industrial Average below the 10500 level and the Standard & Poor's 500 under the 1300 mark - and below its 200-day moving average - no doubt had something to do with extending the market's slide.

In fact, the technical side of stocks is likely to get even more play in upcoming sessions. Jack Schannep, editor at The Dow Theory.com (www.TheDowTheory.com), said the Dow industrials' drop below 10467 Thursday gave the signal for a bear market in stocks. The traditional definition of a bear market is a 20% of a major index, but Schannep defines it as a fall of at least 16% on both the industrials and the S&P 500.

"Whichever definition you use, a Dow Theory sell signal has been followed by bear markets more times than not," he said. "In fact, when combined with my own proprietary Schannep Timing indicator, which has already given a sell signal last month on August 30, at 10914 (on the Dow), the likelihood of a bear market as I define it increases to 78%."

The Dow industrials were recently off 111 at 10208; the Nasdaq Composite was off 64 at 2686, and the S&P 500 had fallen by 15 to 1265.

(END) DOW JONES NEWS 09-24-99 11:41 AM

Media Index

Next