Bulls Run On Wall Street

July 30, 2002

Stocks soared for the second time in a week on Monday, with the Dow up nearly 500 points yet again.

The ISDEX http://www.wsrn.com/apps/ISDEX/ rose 6 to 97, and the Nasdaq surged 73 to 1335. The S&P 500 gained 46 to 898, and the Dow soared 447 to 8711. Volume declined to 1.78 billion shares on the NYSE, but rose to 1.93 billion on the Nasdaq. Advancers led 26 to 6 on the NYSE, and 25 to 8 on the Nasdaq.

After the close, Register.com missed estimates, and FreeMarkets , Macrovision and CSG warned.

During the day, Palm fell 13% after announcing a reverse split.

Network Appliance slipped 2.7% on rumors of business weakness.

Qwest slipped 1 cent after announcing it will have to restate three years of results, which one analyst said could lead to bankruptcy for the firm.

Veeco gained 8% on better than expected results.

Cisco surged 12% and Microsoft and Intel 6%, but Oracle gave back half of its intraday gains to close up 2%.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the internetstockreport.com story link at the top of the newsletter.

A nice move for the market today, but three developments merit caution here. First, today was not a follow-through day for the NYSE, which means that institutional money is not coming back to blue chips at this level. Given the size of the advance and the big decline in volume yesterday, that’s surprising. The second item of concern is the 90% upside days we had today on the NYSE and the Nasdaq. Those would be bullish coming on the heels of a 90% downside day, but we never got a 90% downside day on the way down. In the past, those isolated 90% upside days have tended to mark exhaustion and occur close to tops, according to Lowry’s Reports; the last such one occurred during the one-day rally July 5. Last Tuesday did mark the first time the NYSE had four consecutive 80% downside days in 70 years of Lowry’s data, but that’s probably not the same level of capitulation as 90% downside days. We’ll let you know more on Lowry’s views if we hear more. Another concern is the equity put-call ratio, which hit .51 on the close today. That’s a lot of bullish equity traders at the same time that index traders are buying more puts than calls. Not a recipe for a lasting bottom. If nothing else, we’d have to bet on a pullback beginning no later than Wednesday, if not tomorrow. The one potentially bullish sign here is some upside damage to a bearish rising wedge forming in the S&P 500 60-minute chart off last week’s lows (see first chart below). The Dow (second chart) is forming the same pattern, and a big move up tomorrow in both indexes would be bullish; the indexes busted out of similar patterns early in the April 2001 and September 2001 rallies. 8400-8500 and 865-875 on the S&P are important support for tomorrow. To the upside, if the S&P (third and fourth charts) can clear 900, it could set up a test with the critical 950 level. The Dow (fifth chart) has some resistance at 8725, but 8900-9000 looks more formidable. The Nasdaq (sixth chart) is right at the start of the formidable 1340-1387 resistance level. To the downside, the gap open at 1286 is important support.

/