Blue chip stocks led the way higher on Monday, as traders awaited a Capitol Hill appearance by Fed Chairman Alan Greenspan on Tuesday. Technology and Internet stocks broke a three-day losing streak.
The ISDEX http://www.wsrn.com/apps/ISDEX/ rose 7 to 352, and the Nasdaq climbed 18 to 2489. The S&P 500 rose 15 to 1330, and the Dow surged 165 to 10,946. Volume declined to 1.01 billion shares on the NYSE, and 1.75 billion on the Nasdaq. Advancers led 19 to 11 on the NYSE, and 20 to 17 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.
Shares of still-halted Critical Path changed hands on some electronic communication networks (ECNs) at more than $11 a share, double where it had been trading, after Frost Securities said the company’s accounting irregularities may not be as severe as feared, and may only include the fourth quarter. However, it is not clear when the stock will be reopened for trading, or what the price will be when it finally does.
An earnings warning from Emulex , which plunged 37 1/2 to 40, weighed on storage and infrastructure stocks. EMC
lost 2.24 to 54.16 on rumors of a weak January, Brocade
fell 12 3/16 to 62, and QLogic
plunged 15 5/16 to 55 1/16. Network Appliance
fared better, rising 1 to 39. Traders believe the company may be stealing business from others in the space.
Juniper slipped 4 1/16 to 79 13/16, Sonus
lost 4 1/2 to 34 3/4, and Ciena
fell 6 5/8 to 73 1/4.
Inktomi rose 1 11/16 to 14 9/16 on a deal with Reuters.
Liberate dropped 1 15/16 to 12 3/8 on a Deutsche Bank Alex. Brown downgrade on concerns about deployment delays.
Amazon.com added 1 1/8 to 14 1/2 after Merrill Lynch and CS First Boston came to the stock’s defense. Merrill analyst Henry Blodget said he expects the company to have $850 million in cash to pay year-end bills.
BroadVision lost 7/32 to 10 31/32 after CS First Boston cut estimates after channel checks revealed a slow start to the quarter.
Some technical comments on the market: Note: We are now including 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
The Nasdaq (first chart) found support at its 1990 logarithmic trendline this morning, a line where the Fed has defended the market in the past. It would be a real plus for the bulls if the index can hold that line, and a real negative if it can’t. To the upside, the Nasdaq needs to get back above its logarithmic downtrend line from September at about 2550 (second chart). A quick word on fundamentals: one point where fundamental analysis approaches the predictive value of technical analysis is in the measure of a stock’s historical trading range. One approach we are fond of was outlined in Ken Lee’s book “Trouncing The Dow.” A year ago, that approach labeled Cisco Systems a sell at about $72, meaning that was as high as the stock could reasonably trade given its earnings and growth rate. So where does that system rate Cisco a buy? At 25 1/4, or about 14% down from here. It doesn’t mean that Cisco can’t exceed that price to the downside, just as it exceeded its upsi
de price by about 15%, nor does it mean that the stock will necessarily reach that downside price, but it is intriguing to note that the market’s acknowledged leader is entering a zone where buyers have historically stepped in to support the stock.
The S&P 100 (first chart) and S&P 500 (second chart) may be reforming their rising channels, a hopeful sign. The S&P 500 found support Friday at its broken September downtrend line just under 1310 (third chart).
The Dow held its October uptrend line at about 10,750 on Friday, and could be forming a bullish ascending triangle, with upside potential to 11,700 to 12,300 if it can take out 11,000 with any force, a level the Dow has struggled at repeatedly. A close above 11,007 would be bullish under Dow Theory, the oldest school of technical analysis, particularly if the Dow Transports can stay above 3000; the Trannies continue to hold above that level. But the 11,000 level has been one tough obstacle for the Industrials, reflecting its importance to the health of the market and the economy as a whole.
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.
