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RealTime IT News

Market Can't Hold Gains

News of a merger between Hewlett-Packard and Compaq and better than expected manufacturing data sent stocks to strong gains on Tuesday, only to give them all back by the close.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 5 to 154, and the Nasdaq lost 34 to 1770. The S&P 500 slipped fractionally to 1132, and the Dow rose 47 to 9,997, 185 points off its high. Volume rose to 1.19 billion shares on the NYSE, and 1.52 billion on the Nasdaq. Advancers led 16 to 14 on the NYSE, but decliners led 22 to 14 on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

The NAPM index came in much better than expected, and new orders showed growth for the first time this year with the strongest gain in five years.

But gains faded by the end of the day on rumors that Oracle might warn and weakness in the chip sector. GM's report of a decline in car sales didn't help.

Hewlett-Packard and Compaq both fell on their merger announcement, but Dell rose .87 to 22.25 on speculation that it can gain market share while the merger is completed.

Intel fell 1.06 to 26.90 on negative comments from Lehman's Dan Niles ahead of the company's mid-quarter update on Thursday. Weak Semiconductor Industry Association readings didn't help.

Cisco lost .53 to 15.80 on nervousness ahead of a conference presentation on Friday.

Clarent was halted on news that it will restate earnings for the first half of the year, and placed several executives on leave.

Exodus fell .22 to .66 after CEO Ellen Hancock resigned.

Openwave , up .71 to 16.75, bucked the trend on a Robertson Stephens Strong Buy rating.

Some technical comments on the market: Note: We include charts in the technical market commentary. If you can't get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

One heck of a reversal today. Even at the highs today, however, there were negative signs, such as a high TRIN reading (above .80) and uninspiring internals and breadth. The Nasdaq (first chart) broke down out of a bear flag today, with downside potential to 1650, just above the 1619-1639 April lows. However, the index may not get there in a straight line; the Nasdaq is oversold enough to begin a bounce in the next day or two. With Intel holding an analyst meeting on Thursday and Cisco giving a presentation on Friday, it could be an interesting week. First resistance on the Nasdaq is 1833-1843, and the Nasdaq 100 at 1424 is only about 75 points from its April low of 1348. 1700 was a strong support for the Nasdaq on the way up, the top of the April 4 breakout gap. The Nasdaq gapped up in this area from 1745-1771 on April 9, so 1745 could also be a support, as could 1770, where the index closed today. But frankly, those big ugly candlesticks in the Nasdaq indexes today do not look encouraging for more than a short-term bounce. The Dow (second chart) retested last week's breakdown at 10,175 today. 10,200 is critical resistance, and 9869-9900 is support. Last week's breakdown projects minimum downside to 9600-9700, and possibly back to the 9100-9400 lows. The S&P 500 (third chart) was turned back at 1156 resistance today, and 1125 is first support. Below that, a retest of the 1080-1100 lows becomes likely.

Special report: For a free introduction to technical chart patterns and an overview of last year's action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.