Bulls Take A Breather

Stocks gave back some gains on Tuesday on concern over the rising price of crude oil, which hit $30 a barrel for the first time since May.

The Nasdaq fell 17 to 1376, the S&P 500 lost 13 to 937, and the Dow fell 118 to 8872. Volume edged higher to 1.28 billion shares on the NYSE, but declined to 1.5 billion on the Nasdaq. Decliners led 19 to 12 on the NYSE, and 19 to 13 on the Nasdaq.

After the close, Newport slipped on a warning, Sycamore beat estimates, and Portal matched estimates.

During the day, Agilent fell 7% after missing estimates.

Emulex continued to add to recent gains, tacking on another 6%.

United Online , Neoware and J2 Global Communications hit new 52-week highs.

Hotels.com lost 3% on an anthrax scare that appeared to be a hoax.

Micron fell 8% on a downgrade.

PayPal gained 10% as its merger with eBay cleared a hurdle.

Qwest soared 31% on an upgrade.

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.

With the S&P and Wilshire 5000 (first two charts below) right at major resistance yesterday, today’s pullback was not a surprise. That 951 level on the S&P 500 is major resistance, and we do not expect a close more than 2% above that level; if the bulls can pull that off, they will be on to something. As far as we know, that is the biggest head and shoulders top in U.S. market history, at least in the 105-year history of the Dow. It may not work out, and the bulls may yet pull this off, but most sizeable tops in U.S. market history have led to substantial declines, the largest before now likely a head and shoulders top that formed from 1915-1917 in the Dow. If nothing else, those necklines represent support and resistance levels that have been fought over for five years, and a strong move to either side of those lines should be respected. To get down to the more mundane daily charts, the S&P (third chart) has significant resistance at 951 and 960. Support is 1930 and 910-915 (critical). The Dow (fourth chart) has resistance at 9000-9050, and support at 8820, 8750, and 8675 (critical). The Nasdaq (fifth chart) has resistance at 1410, and support at 1370, 1355, 1322 and 1305 (critical). At this point, we’d have to bet on another day or two on the downside here, perhaps to those lower trendlines. Lower than that and something bigger may be occurring.





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