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Rally Loses Momentum

Blue chip stocks pulled back on Wednesday, but the Nasdaq posted its third straight gain in heavy volume.

The ISDEX http://www.wsrn.com/apps/ISDEX/ added less than a point to 129, and the Nasdaq gained 6 to 1725. The S&P 500 lost 6 to 1091, and the Dow fell 54 to 10,243. Volume declined to 1.41 billion shares on the NYSE, and 2.26 billion on the Nasdaq. Advancers led 17 to 15 on the NYSE, and 18 to 17 on the Nasdaq.

After the close, Brocade guided estimates higher.

During the day, Applied Materials edged higher on better than expected results.

Hewlett-Packard fell 5.6% after missing estimates, and Network Appliance plunged 16% on a warning.

Computer Sciences surged 12% after beating estimates and raising guidance, and BEA Systems gained 2.7% on its earnings report.

Computer Associates fell 7% on news of an SEC investigation.

Dell gained 3% ahead of tomorrow night's earnings report.

Oracle rose 4% on rumors that the company made its quarter with two weeks to spare.

QLogic fell 4.8% on a valuation downgrade.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the internetstockreport.com story link at the top of the newsletter.

Not a pretty reversal this afternoon, and the lack of news to account for it is even more disturbing. The Nasdaq (first chart below) was rejected at its main downtrend line (1760-1770), the S&P 100 (second chart) was turned back at major resistance (550), the Dow (third chart) was repelled at the critical 10,350-10,600 area, and the S&P 500 (fourth chart) couldn't hold the important 1100 level. That's a heck of a lot of resistance to hit at one time, so perhaps the pullback isn't too surprising, but the market will have to take out all those levels if this rally is to continue. Important support is 1696 on the Nasdaq, 1091 on the S&P 500, and 10,150-10,200 on the Dow (fifth chart). It would be nice to see this rally put some distance between those support levels and take out some major resistance to the upside. Until that happens, the rally remains vulnerable.

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