NEW YORK (CNN/Money) - The Nasdaq composite index tested its recent bottom Monday morning, sliding below its July low and on target for its lowest close in more than six years, while the Dow Jones industrial average came closer to its recent low.

"It's been a more typical September than I expected," said Jim Waggoner, chief market strategist with Pace Capital Management. "Earnings preannouncements have been disappointing, and surprisingly so, and economic news has been disappointing, and surprisingly so. I expected September to be on the strong side because the year overall has been so bad."

Fears of a possible war with Iraq coupled with negative news out of the tech and telecom sectors drove the markets down. The Iraq jitters, along with anxiety about offshore oil rigs as Hurricane Isidore moves through the Gulf of Mexico, helped send crude oil futures above $30 a barrel in New York

The Nasdaq reached its low of the day at 12:03 p.m. ET, when it was down 35.40 to 1,185.69. That was nearly five points below the July 24 low of 1,192.42. If the market closes at that level, it will be the lowest close since Sept 12, 1996, when it hit 1,165.81.

The Dow slid as far down as 7,788.42, within 87 points of its July 23 closing low at 7,702.22.

Waggoner said there is still room for an end-of-the-day rally, which could pull the Nasdaq back off its lows. But if the level stays low, a lot of people could short stocks coming into Tuesday morning.

"We're setting ourselves up for some kind of rally," Waggoner said. He added that he expects a rally sometime in October.

Helping the markets lower Monday, JDS Uniphase (JDSU: Research, Estimates) warned that its sales for the quarter ending this month will be 5 percent below earlier guidance, citing continued weakness in telecom industry.

Credit Suisse First Boston lowered earnings estimates for a number of telecom stocks, and Lehman Brothers slashed estimates on many software sector companies.

In economic news, the Conference Board's index of leading economic indicators for August came in slightly weaker-than-expected at a decline of 0.2 percent, the third-straight monthly drop. Economists surveyed by Briefing.com had forecast a dip of 0.1 percent.