Bears Finally Ease Up

Sellers finally eased up on Friday afternoon, as stocks ended the day only modestly lower.

The ISDEX dropped 7 to 521, and the Nasdaq lost 4 to 3027. The S&P 500 declined 4 to 1367, and the Dow fell 26 to 10,629. Volume rose to 1 billion shares on the NYSE and 1.7 billion shares on the Nasdaq. Advancers led by 14 to 13 the NYSE, but decliners led 20 to 17 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.

It was Commerce One’s turn to fall apart, losing 6 1/8 to 47 3/16 on rumors of weak sales. The company denied the rumors, but it was enough to break an uptrend stretching all the way back to April. Merrill Lynch and UBS Warburg defended B2B stocks, but investors weren’t in much of a mood for buying them.

Technology and Internet leaders continued to struggle. Broadcom lost 12 1/4 to 132 1/4. The stock has downside potential to 125 or lower, and got as low as 127 13/16 today. Ariba fell 1 3/4 to 76 1/8, a day after falling back below its June breakout point of 83 1/2; today’s high was 83 5/8. Possible support points are 70 and 60, but the stock has room to 49. Juniper Networks lost 9 1/16 to 152 3/4, and could be headed as low as 120.

Nortel Networks , off 3/16 to 34 1/4, continued to get hit by rumors about weakness, as did Corvis , off 5 11/16 to 33 5/16. Ciena , up 6 3/4 to 104 7/16, gained after taking some of Qwest’s business away from Nortel.

Ziplink , halted at 13/32, became the latest in a string of dot-com companies to go out of business. The company said it will not return any proceeds to shareholders.

Agile Software plummeted 8 1/2 to 55 3/8 despite beating estimates by a penny with a 1-cent loss. VA Linux added 1 3/8 to 13 3/8 after matching estimates with a 15-cent loss. Broadbase Software lost 3 7/8 to 10 1/8 on an earnings warning.

VeriSign lost 4 3/16 to 113 3/4, but well off its 102 1/2 low, after China’s Ministry of Information said no organization could provide services or act as an agent for Chinese-language domain-name registration without prior approval, casting doubt on the firm’s registration service launched last week.

Phone.com , off 1 5/8 to 87 3/4, is set to merge with Software.com after a shareholders vote today.

PSINet lost 1/2 to 1 1/2 on news that the company’s CEO would have to sell as much as 11 million shares to cover a margin call.

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Some mixed developments at the close. The Nasdaq formed a doji, an up-and-down day that ends unchanged, signaling a potential reversal. But the index also finished with its lowest weekly close of the year, a longer-term bearish development. The Nasdaq 100 failed to get above yesterday’s breakdown at 3000. The bearish pennant breakdown two days ago gives the Nasdaq 100 downside potential to the 2500-2750 range. The Nasdaq 100 has a gap to fill at 2836 and the Nasdaq at 2966; both indexes came just short of those numbers today, which makes us think this level will be revisited at some point to finish the job.

The ISDEX continues to form a potential broadening bottom. A break above the top line at 680 would mean a bottom is in, and give the index room to 850. A nice looking chart, but be on guard for a possible retest of that lower trendline at around 500, which we came close to today.

We continue to watch the S&P 500’s 1994 logarithmic trendline at 1369, which we closed below for the first time on a weekly basis. If we close below that line by more than 2%, or 1335, we may have seen the end of the bull market. The index has repeatedly come close to a major technical breakdown over the last month or so, but has somehow escaped from the abyss each time.

The Dow may be forming a small head and shoulders top here, with a neckline around 10,550. However, the index will continue to have a bullish posture as long as it stays above 10,369. First major resistance is 10,850, the old diamond apex, and critical resistance is 11,000, where the index has failed five times.

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