12:40pm (EST)

The market stayed in a tight range for much of today’s session but the sell-off has picked up steam as both the bulls and bears get ready for October.  After a strong September, the bulls will be looking for history to repeat itself, as it usually portends a positive October and fourth quarter going forward.

According to the numbers, when the market rises 5% or more in September, October is up, on average, 1%.  There was one occurrence, in 1939, following this type of September returns where the market did not advance in the fourth quarter so the bears have some “history” too.

We have mentioned over the past month that volume continues to be light and we think that trend could continue as we see a lot of people were sitting out the volatility and waiting for a trend to emerge.  Volume could pick back up as we head into the bulk of earnings season but until we get a breakout, we feel this market will remain range bound.   

The Dow is currently down 101 points to 10,728 and is back below the 10,800 level.  Short-term support will come in at 10,600 but a break below this level will likely lead to a test to the bottom of the current 4-month trading range.

The S&P 500 is off by 12 points to 1,134 and the bulls will have to hold the 1,125-1,130 level to keep the bears from gaining serious momentum.  The index has traded to a high of 1,148 and the continued test and fail of the 1,150 level is doing some serious technical damage to the index.  However, if we get a breakout above 1,150 and it looks like it’s a real breakout, it will give the bulls confidence for another push to new highs for the year.

The Nasdaq is lower by 34 points to 2,336 and is back below the 2,350 level. We have been mentioning a possible top at 2,400 which was hit last Thursday and support will come in at 2,300.


As far as specific stocks, Microsoft (MSFT, $23.85, down $0.53) is down 2% after getting a downgrade from Goldman Sachs (GS, $145.48, down $2.22) based on valuation.  Shares were cut to “Neutral” as the company continues to struggle to gain market share in mobile devices which is the wave of the future.

Microsoft’s price target was also cut from $32 to $28.

We don’t get too hung up on analyst upgrades and downgrades because most of the time they are late to the party and issue an alert after the fact.  However, we can agree with this one as shares of Microsoft have been a boring investment over the last decade. 

The problem with Microsoft lies with its CEO, Steve Ballmer, who has failed to see the growing trend to mobile computing.  The company has struggled to match mobile devices from rivals like Apple (AAPL, $278.91, down $3.61) and Google (GOOG, $522.05, down $3.57) whose iPhone, Droid smartphones and the iPad have revolutionized how people get information and keep in touch now.

These devices have the potential to hurt computer sales going forward as consumers start to favor tablets and are developing a loyal following.  This should keep a lid on Microsoft’s share price but the company needs a change at the top if it is to stay competitive with the changing world.

It looks like the bears could get serious today and it will be interesting to see how the close shakes out.  Subscribers, check the Members Area for the latest updates.