Bulls Finally Win One

Technology and Internet stocks finally took a breather from their September swoon, but weakness in Intel and Hewlett-Packard kept the Dow under water.

The ISDEX gained 15 to 780, while the Nasdaq rose 44 to 3893 after bouncing off 3800, preserving its uptrend from May. The S&P 500 added 2 to 1484, while the Dow fell 51 to 11,182. Volume rose to 1.06 billion shares on the NYSE and 1.65 billion on the Nasdaq. Decliners led 14 to 13 on the NYSE, but advancers led 20 to 19 on the Nasdaq. Oracle and Red Hat report earnings tomorrow. The PPI for August will be reported tomorrow and the CPI on Friday. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our new after hours trading site.

After the close, Fatbrain announced that it will be purchased by barnesandnoble.com for $4.25 a share, below the stock’s closing price of 4 3/8. Fatbrain also beat earnings estimates by 17 cents with a 62-cent loss.

Cisco Systems , which led the Nasdaq’s 7-day 450-point slide, recovered 2 1/2 to 61 3/8 after trading as low as 57 7/32. The technology and Internet leader broke its May uptrend line and closed below its 200-day moving average on Monday. Nortel gained 4 to 67 3/4 on news that its fiber optic gear sales were strong. Telecom equipment stocks have been weak on concerns that spending may be slowing. In a note titled “Uh Oh, CSCO,” UBS Warburg strategist Gail Dudack called CSCO’s fall through the 200-day moving average and $60 support could lead to a retest of the May lows for both the Nasdaq and Cisco, which bottomed at $50 in May.

Amazon.com slipped 3/16 to 42 1/2 after Lehman Brothers refused to buy into the Christmas rally scenario for the stock. Lehman maintained its Neutral rating on the stock and said Amazon’s holiday season may not be a strong as previous ones.

Inktomi was off 1 to 110 after announcing the acquisition of live streaming company FastForward Networks for $1.3 billion in stock.

JDS Uniphase recovered 1 9/16 to 104 3/4 after falling yesterday on concerns that its merger with SDL may be in trouble. Merrill Lynch reiterated near-term Accumulate/long-term Buy on the stock on the heels of yesterday’s analyst meeting.

eBay gained 7/16 to 62 5/8 on a Banc of America Buy rating and $80 price target. TMP Worldwide gained 2 15/32 to 73 11/32 on a Banc of America upgrade to Strong Buy and $120 price target.

PSINet gained 1 3/16 to 15 1/2 despite a Robertson Stephens downgrade to Attractive from Buy.

Razorfish gained 5/8 to 12 1/4 on a CS First Boston Strong Buy rating and comments that the company’s quarter appears to be on track.

Quokka Sports soared 2 1/2 to 8 1/2 on speculation that its alliance with NBC will be a boon to the company during the Olympics.

Beyond.com , up 13/32 to 1 15/32, announced that it will not be delisted from the Nasdaq National Market after regaining compliance with listing requirements.

B2B stocks were generally lower except for i2 , up 10 1/8 to 171 1/4.

Allaire finally stopped sliding, up 3/8 to 21 1/2. Company officials told Internet Stock Report yesterday that they knew of no reason to account for the two-week slide from $38. Analysts have reiterated positive comments on the stock the last few days.

Som

e technical comments on the market: The May uptrend lines on the Nasdaq Composite (3794) and the Nasdaq 100 (3610) held this morning, as we were hoping they would. Can the bulls build on this victory? To do it, the Nasdaq and Nasdaq 100 will have to clear their old downtrend lines at 3900 and 3750, respectively. Both indexes closed just below those levels today. To the upside, the Nasdaq faces resistance in the 3950-4000 area, and then again at 4100. A break below the May trendlines would likely lead to a retest of the May bottoms.

The ISDEX did not come close to its May uptrend line, which is now around 720, and found support at 750 this morning. To the upside is 790-800 resistance, and then the 50% retracement level of 850, where the index’s recent rally was capped. The Dow is struggling around the 11,200 area and appears to be forming a head-and-shoulders top here. Now that the JP Morgan acquisition is out of the way, the blue chips may take a breather. First support is around 11,100, and then every 100 points below that until the critical support of 10,850, the upper boundary of the Dow’s bearish diamond pattern, which the index broke out of last month. To the upside, resistance on the Dow is 11,200, 11,300 and 11,400. A move above 11,320 would negate the head-and-shoulders top. The S&P 500 is back above 1480 support. First resistance is 1490, then 1500 and 1507. To the downside, 1460 is the first strong support below 1480.

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