By Clyde Noel

Stock Report

Long-term investors are facing tough choices these days. Either sell low or face more punishing losses.

U.S. stocks have just ended the quarter with their biggest losses since the 1987 stock market crash, but the worse is yet to come, say technical analysts who chart stock movements.

They say the market hasn’t seen a “wholesale” dumping of stocks needed to wash out the excesses from the 1990s. Uncertainty over Bush’s Iraq war and corporate earnings has brought technical analysis into greater demand and now is used more by analysts.

The Standard and Poor 500 index dropped 17 percent in the third quarter and could fall another 20 percent in the next couple of months.

Equating that to the Dow Jones industrials would mean the Dow Jones index could fall 5500 to 5800 within the next couple of months. Nasdaq could drop another 15 percent to the 1000 level before it improves.

A smattering of dour earnings news from corporate giants shoved the Nasdaq to a 6-year low last week and the Dow Jones slumped to a new 5-year closing low.

The Town Crier index fell another 7.4 percent last week and is down 45.45 percent since Jan. 1. What drove down the Town Crier index was the few New York Stock Exchange stocks listed in the index. Comerica fell 11 points to $37 a share for a 24 percent drop; LSI Logic fell 13 percent and Silicon Graphics 30 percent.

One thing is certain. If you bought a stock at $90 or above and it is now $5 and you want to hang on, remember you can hold it till your face turns blue because you’re not going to get back to the top of the bubble.

Don’t hold the stock till you think it’ll get even. Problem is, it’s hard to tell a lousy stock that you shouldn’t have bought in the first place, from a good quality stock that is suffering as much as the big loser.

Dividends? There are some dividends by good companies, but consider them a return of capital at a lower amount. For the time being investors should continue to stay on the sidelines.

Sellers will hold the upper hand this week as the third-quarter reporting season begins in earnest and the markets wait for major economic reports. There is way too much uncertainty to propel the market upward and too much uncertainty to say the market won’t tumble.

“Market signals” from Northern Trust, soon to open in Los Altos, says earnings are the key to restoring investor psychology. In their analysis of large caps versus small caps they state: “We have reduced our weightings in small and mid cap socks, allocating a portion to large-cap stocks. The remainder is being allocated to cash, and will be deployed when conditions are more favorable.”