Nasdaq: How low can it go?

NEW YORK - The Nasdaq composite index appears poised to go wheremarket analysts figured and investors feared it would - down to itslow.

But a drop might not be all bad for the Nasdaq, which has waffledaround 2000 since April.

"The market has been hovering at the low end of the range, unableto put in any real kind of bounce. It looks like we might need to goa little further down," said Scott Bleier, chief investmentstrategist at Prime Charter, of the tech-focused index.

It's normal for the major stock indexes to drop back to theirmost recent lows - which for the Nasdaq was 1619.58, reached duringtrading on April 4 - before heading higher again. If the Nasdaqdoesn't crash below that level - and no one expects that it will -investors could get a psychological lift that will get them buying,and help send the Nasdaq climbing again.

The recent performance of the Nasdaq, which fell below 2000 formuch of the past week, has only frustrated investors who are lookingfor the technology sector to lead the overall market higher.

The Nasdaq "has been blocking and tackling and struggling. But ithas never tested that low," said Larry Wachtel, market analyst forPrudential Securities. "The process has been tedious."

Initially the Nasdaq appeared unrattled by the grim second-quarter earnings reports and profit warnings for the third quarterthat began hitting Wall Street in mid-July. It managed to hang ontothe 2000 level, which encouraged analysts, particularly in the faceof a profit warning from Microsoft and an announcement from Intelthat business is so tough it can't make projections.

By this past week, however, the Nasdaq had a tougher time dealingwith disappointing news, including a revenue warning Thursday fromHewlett-Packard, a wider-than-expected loss Tuesday from LucentTechnologies and a revenue warning Monday from Amazon.com.

The Nasdaq's lackluster performance has been particularlytiresome because the tech sector has come to represent the entiremarket. As it soared and crumbled, so did the rest of the market andinvestors' commitments to Wall Street.

"Tech continues to be the bad guy," Wachtel said.

While the tech decline that began last year has rightfully souredinvestors, analysts say it's unfair to base the entire market'sperformance on technology.

Stocks outside of technology - drug makers, bankers,manufacturers and retailers, have fared much better than computerand chip makers, Internet providers and networking manufacturers.

But "most people don't realize it, because it isn't reflected inthe indexes," said Gary Kaltbaum, market technician for Investors'Edge Partners. Kaltbaum noted that technology comprises about 30percent of the Standard & Poor's 500 index, Wall Street's broadestmeasure. And, four of the Dow's 30 stocks are tech bellwethers:Intel, Microsoft, IBM and Hewlett-Packard, all of which have comeout with disappointing news in recent weeks.

But analysts remain optimistic about the Nasdaq, and in turn theoverall market. They say stocks stand to benefit eventually from thesix interest rate cuts made this year. And they expect Wall Streetto rally when companies are able to report results in the third andfourth quarters that show improvement over last year, when theeconomy and earnings began to slide.

But the advance will be choppy and investors will be tentative,because - like a test of the lows - that's normal too.

"The market always goes up a wall of worry," said Al Mirman,market strategist at V Finance in Sarasota, Fla. "A year from nowthese stocks will be much higher."