Bulls Prove Their Mettle

Stocks survived an earnings warning from Microsoft on Friday to end the day only modestly lower.

The ISDEX http://www.wsrn.com/apps/ISDEX/ slipped 1 to 202, and the Nasdaq lost 17 to 2029. The S&P 500 lost 4 to 1210, and the Dow declined 33 to 10,576. Volume declined to 1.15 billion shares on the NYSE, and 1.63 billion on the Nasdaq. Advancers led 15 to 14 on the NYSE, but decliners led 18 to 16 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.

Microsoft fell 3.42 to 69.15 after meeting estimates, but guiding down next quarter’s estimates to 39-40 cents a share from estimates of 45 cents. The company doesn’t see a rebound in PC shipments until next year. Separately, Gartner Dataquest reported the first decline in PC sales in 15 years.

eBay rose 2.39 to 66.79 after topping pro forma estimates with earnings of 12 cents a share. Fully diluted earnings of 9 cents a share met estimates, a rarity for an earnings season that has been marked by huge accounting write-offs. eBay also raised guidance for the second half of the year by 5%-10%.

Sun Microsystems rose .60 to 15.04 after topping estimates by a penny but guiding estimates lower. Commerce One dropped .84 to 4.05 after missing estimates. Scientific Atlanta plunged 12.28 to 22.80 on an earnings warning.

Check Point dropped 4.22 to 35.69 ahead of Monday morning’s earnings report.

E.piphany rose .49 to 9.69 after topping estimates, and SonicWALL rose .60 to 21.79 on its earnings report.

PMC-Sierra and Vitesse fell on weak earnings reports on a generally weak day for chip companies. Gateway plunged 3.60 to 10.99 after missing estimates and warning. Nortel , down .21 to 7.54, met estimates of a 48-cent loss but could provide no visibility.

Inktomi rose .26 to 5.34 after topping estimates.

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The Energizer bulls just take a licking and keep on ticking. One impressive show from the bulls today in the face of the unexpected warning from Microsoft. The only weak sign was a poor showing from chip companies, which usually lead the market, not follow it. The Nasdaq (first chart) managed to finish above its open today to create a white candlestick, quite a feat. First resistance is the index’s steepening downtrend line (the blue lines), which seems to be at about 2060 for Monday. First support is 2000, and below that 1972 is the next likely target. The Dow (second chart) hasn’t gone very far since breaking out of a bearish rising wedge in the hourly chart this morning. We’ll see if it can recover next week. In the daily (third chart), it could still be forming an inverse head and shoulders bottom, and a move through 10,700 would look pretty good at this point. 10,430 is important support. The S&P 500 (fourth chart) held its downtrend line breakout at about 1210 today, an amazing accomplishment under the circumstances. Below that, 1200 is important support. Today-Monday is a possible turn date; we’ll see if the market gives any clear direction on Monday. And finally, an important chart: the Nasdaq is about to have a bearish moving average crossover on the weekly chart (fifth chart), a rare event, and one not seen in this market in a major index for years. That should occur in the next two or three weeks. It could be a lagging indicator, but the Nasdaq had a bearish moving average crossover in the daily chart last fall before the worst of the sell-off. Something to keep an eye on. And the latest AAII survey showed individual investors bullish by 50%-15%. Too much bullish sentiment is a dangerous thing. August 4-5 still looms as the most important turn date for the market in the coming months.

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