Bulls Storm Back

Internet and technology stocks roared back on Thursday to recover from steep declines at the open.

Stocks initially dropped after Motorola lowered handset sales guidance, but then rebounded on rumors that Cisco was reassuring investors that its earnings report next week will not disappoint. The ISDEX gained 32 to 717 after falling as low as 656. The Nasdaq gained 101 to 3759, almost 250 points off its low. The S&P 500 gained 13 to 1452, but the Dow lagged, gaining only 19 to 10,706 after being up almost 60. Volume rose to 1.05 billion shares on the NYSE and 1.83 billion on the Nasdaq. Breadth was negative, however, with decliners leading 15 to 13 on the NYSE and 22 to 17 on the Nasdaq. Traders awaited Friday’s July employment data, which is expected to show a 70,000 gain in non-farm payrolls, a 4% unemployment rate, and a 0.3% gain in hourly wages. For earnings reports, visit our earnings calendar and reported earnings.

After the bell, Jupiter Communications blew away estimates by 18 cents with earnings of 11 cents a share. The stock soared to 30 after hours after ending the day down 1 1/2 to 25 1/2. theglobe.com beat estimates by 8 cents with a 33-cent loss. The stock rose to 1 3/4 after hours after gaining 1/16 to 1 5/8 during the day. Emulex also rose strongly after beating estimates.

Cisco Systems saved the day. After falling below the important $60 level, rumors began to circulate that Cisco was reassuring investors that next Tuesday’s earnings report will not disappoint. Investors have been nervous about the earnings report since someone bought 56,000 puts on the stock earlier this week, a bet that the stock will fall.

Internet leaders got whipped around in the volatile trading. Yahoo gained 4 1/4 to 131 3/8 after trading as low as 123. Ariba gained 8 5/16 to 123 1/8, 15 points off its low. eBay managed to get back to the important $50 level, rising 1 1/8 after trading as low as 46.

Vignette continued its strong rebound, up 4 1/8 to 39 1/8, 12 points above Wednesday’s low, on news of an alliance with IBM . The company broke its uptrend last week at 42; that line, which could pose some resistance, has now risen to about 45. The stock’s high today was 40 1/8.

After the bell on Wednesday, Go.com beat estimates by 11 cents with a 34-cent loss. Goldman Sachs raised the company from Outperform to Recommended List, and the stock gained 1 9/16 to 12 3/16. The company will become the Disney Internet Group on Monday, stock symbol DIG.

ZDNet beat estimates by a penny with 7-cent earnings, and CS First Boston upgraded the company from Hold to Buy, but the stock slipped 1/2 to 16 1/4. The company is being purchased by CNET , which lost 1/2 to 28 1/16.

Talk.com gained 1/4 to 4 15/16 after beating estimates by a nickel with a 1-cent loss. But Peapod missed estimates by 19 cents with a 58-cent loss, and the stock declined 5/16 to 2 1/16.

Getty Images bolted 5 to 41 after announcing that second-quarter earnings before interest, taxes, depreciation and amortization almost tripled to $22.4 million.

Lionbridge gained 15/16 to 8 15/16 on a CIBC World Markets Strong Buy rating and price target of $20. CIBC called the company its top small-cap pick.

Mortgage.com slipped 3/32 to 1 1/16 on a USB Piper Jaffray downgrade from Buy to Neutral on disappointing revenue and earnings.

Ventro bolted 3 5/16 to 13 7/8 on news of an alliance with American Express to create an online marketpla

ce for corporations to purchase business products and services. The two will form a new company called MarketMile.

Sonus Networks soared 24 to 202 on a bullish conference presentation.

DSL equipment maker Westell fell 2 13/16 to 15 5/8 on a Jefferies & Co. downgrade from Buy to Hold.

Two recent IPOs continued to gain. Avici soared 30 1/2 to 162 1/2. SpeechWorks bolted 18 1/32 to 87.

Two IPOs got a lukewarm reception on their first day, however. iAsiaWorks priced at 13 but fell to 9 1/2. ScreamingMedia.com fell to 10 3/8 after pricing at 12.

Some technical comments on the market: We may have a minor reversal here, as the market’s intraday turnaround came on high volume. A few negatives, however: breadth was poor, the blue chips didn’t participate (signaling a possible continuation of the rotation that has dominated this week’s trading), and the Nasdaq finished right at some tough resistance, the 3750-3766 area. Not likely signs of a sustained bull run, but something to build on. The Nasdaq turned around after trading as low as 3521, in the process filling a gap from early June at 3585, a good sign because it gets that downside lure out of the way. We still have the employment report tomorrow and Cisco’s earnings on Tuesday ahead of us. Following that is Dell’s earnings report next Thursday, and we’ve already been warned of weakness there. To the upside, the Nasdaq has run into heavy resistance right here (3759). If the Nasdaq can clear this level, next up is the 3820-3830 level, and then the 200-day moving average at around 3900. However, we still have potential downside to 3042, due to the break of a bearish rising wedge last week, and we are entering a seasonally weak period between now and October. A break and close below 3500 would be a big warning sign. The ISDEX found support this morning in the 650 range (656), but stronger support is to be found in the 600 and 560 areas. In fact, if the Nasdaq and ISDEX could turn around at 3200 and 600, respectively, we might have some manner of bottom. The ISDEX also broke a rising wedge last week, and has potential downside to 560. To the upside, the lower boundary of the broken rising wedge is now around 750-760, and above that is 790 resistance. Above that, the ISDEX turned back recently at 840, just below its 50% retracement level of 845. The Dow and the S&P broke through resistance at 10,700 and 1450 today, but the Dow gave up most of its gains by the close. The S&P 500 also broke a bearish rising wedge last week, with potential downside to 1361. The index found support at 1414 last week and at its 200-day moving average today (1425). Critical support is 1390, the index’s October 1998 uptrend line. A break of that trendline could carry the S&P to 1170 or lower, so we do not want to violate that line. The Dow turned back last Friday after testing the lower boundary of its bearish diamond pattern (10,464, but we’ll continue to use 10,200-10,300 because of strong support in that range and the requirement of a 3% break of a major pattern). A break of that line could carry the Dow as low as 8,500. The upper boundary of the Dow’s bearish diamond pattern is just under 11,000. The Dow’s recent rally was halted at 10,875.

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