Blue Chips Surge

Blue chips stocks surged Monday on hopes of a neutral Federal Reserve, but Internet and technology stocks again lagged.

The ISDEX fell 14 to 399, and the Nasdaq lost 47 to 2947. The S&P 500 gained 5 to 1320, and the Dow soared 168 to 10,542 on strength in cyclicals. Volume declined to 491 million shares on the NYSE and 854 million on the Nasdaq. Decliners led by a few issues on the NYSE and by 23 to 12 on the Nasdaq. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our after hours trading site.

Cisco fell 2 5/8 to 45 7/8 at the start of a two-day analyst meeting.

Optical networking stocks rose on positive comments from ABN Amro. JDS Uniphase rose 1 7/16 to 57 5/8, Ciena , which reports earnings Thursday, climbed 5/16 to 77 1/4, and Corning added 1 7/16 to 62 3/8.

eBay fell 2 3/4 to 32 on concern that the company may buy CMGI unit uBid or other companies.

Ariba slipped 5/8 to 60 5/16 despite Sprint PCS' launch of its Ariba-powered B2B platform. Positive comments from CS FirstBoston also didn't help B2B stocks, as Commerce One lost 1 7/16 to 27 7/16, and i2 fell 8 3/8 to 91.

Robertson Stephens cut 2001 estimates for Ameritrade , off 3/8 to 8 7/16, and E*Trade , up 5/32 to 8 15/32.

Intraware plummeted 1 to 1 13/16 after announcing that it will lay off 47% of its workforce, or 180 employees.

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The Nasdaq and ISDEX are retesting their recent lows on lower volume, and so far haven't made lower lows (2523 and 382 were the recent lows), all of which are positives for Net and tech stocks. Now can they rally from here? If the Nasdaq can take out 2755 and the ISDEX 434, we would break the cycle of lower lows and lower highs. To the downside, a break of 2523 would likely lead to much lower lows, potentially to around 2200 on the Nasdaq and 2100 on the Nasdaq 100 (see chart below). The 1990 logarithmic trendline is around 2300-2400 on the Nasdaq, a major support.

The ISDEX has so far held strong support in the 375-400 range. If it can take out its broken support line at about 450, a bottom of some sorts may be in.

The S&P 500 got back above its broken support line at about 1315, and has so far held support around 1300. 1330-1340 could provide upside resistance, as could the broken 1994 log trendline at about 1388.

The Dow is just below its downtrend line at about 10,585; north of that line, and the old economy stocks could drag the whole market higher. The index could still be forming a 400-600 point descending triangle, with potential downside to 9750-10,000. A close below 10,369 would be bearish.

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