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Market Summary:

The big picture continues to be one of it could be worse. Yes the major indexes are weakening, but the wall of worry keeps rising, dare we say it? At the speed of a cable modem connection. The S&P held above 1200. NASDAQ still has support at 2200. The Amex Internet Index (IIX) is still above support. And the small stocks as measured by the Russell 2000 are still above support levels as well. If any of these things changes, we could be in for at least another 5 to 10% down from current levels. And the market could make the decision as early as today (February 10th).

The most interesting event of the day wasn't that the NYSE AD Line continues to weaken. Nor that the number of stocks making new lows continues to increase. It isn't even the fact that all the major inedexes are poised to test crucial support levels.20

What caught our eye was the fact that Lycos got bought out, and that nobody was happy about it. That single event suggests to us that the internet game has entered a new phase. The phase of possible capitulation, not only by investors who dumped the stock, and the rest of the sector, but by the companies themselves, who may be realizing that they can't make as much money as they thought.

Capitulation leads to irrational behavior. Irrational behavior leads to bad decisions. Bad decisions lead to sad conclusions. But one side's bad luck is the other side's pot of gold. That is the basic tenet of the greater fool theory. The next step is then, to see which of the huge media players is next to pony up to the search engine/portal/shopping mall/content site/bookstore/virtual experience of the century trough. And who will be the lucky owner of the next "earnings don't matter, it's just revenue that counts" web company. The more things change.........

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