Bulls Try It Again

Traders tried again on Tuesday to rally technology and Internet shares, sending the Nasdaq and ISDEX higher. Blue chips hovered around unchanged, largely on more JP Morgan buyout rumors.

The ISDEX regained 15 to 787, while the Nasdaq rose 49 to 3945. The S&P 500 added 3 to 1492, and the Dow was unchanged at 11,195. Volume rose slightly to 455 million shares on the NYSE, but was unchanged at 695 million on the Nasdaq. Decliners led 13 to 12 on the NYSE, but advancers led 18 to 16 on the Nasdaq. Oracle and Red Hat report earnings on Thursday. The PPI for August will be reported on Thursday 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.

NetCreations plummeted 7 7/8 to 13 after warning that third-quarter earnings will come in at 4-6 cents per share instead of the 11-cent earnings analysts expected. But DoubleClick gained 3 3/16 to 36 15/16 a day after a positive analyst meeting.

Diamond Technology Partners rose 2 1/2 to 74 on a Donaldson, Lufkin and Jenrette Top Pick rating and $100 price target. DLJ was bullish on DTPI’s definitive agreement to merge with Cluster Consulting.

AskJeeves gained 1 1/8 to 27 after announcing the creation of AskJeeves Japan.

SpeechWorks , down big yesterday on valuation concerns, rose 1 5/16 to 65 15/16 on partnerships with Palm and General Magic , which gained 9/16 to 8 1/32.

StarMedia tacked on 7/8 to 11 5/8 after announcing a Latin American wireless Internet alliance with Compaq.

B2B stocks were mixed after a strong recent run. FreeMarkets slipped 9/16 to 76 15/16 after trading as high as 82 on news of an alliance with Microsoft. Ariba gained 2 3/8 to 155 15/16 on a deal with Blue Martini , up 1 1/8 to 53 5/8, and on rumors that more contract wins were coming. i2 rose 9 7/8 to 168, but Commerce One lost 2 5/16 to 72 13/16 after trading as high as 80, and PurchasePro gave back 2 1/2 to 67 1/8 after trading as high as 73.

Yahoo recovered 3 5/16 to 109 5/8 on a Bear Stearns Buy rating and $160 price target. The firm believes Yahoo’s long-term returns will outperform the broad market indexes.

Ventro rose 1 1/8 to 17 1/4 on news of a foodservice industry distribution venture.

Allaire fell another 1 13/16 to 21 3/8, continuing to slide despite positive analyst comments.

Some technical comments on the market: The Nasdaq and Nasdaq 100 bounced off critical support, the downtrend lines from March broken last month (3900 on the Nasdaq, 3700 on the Nasdaq 100). However, the rally has so far lacked conviction, leading us to believe that we may get a small rally here and then more selling. Next support below those downtrend lines is the May uptrend lines at 3750 on the Nasdaq and 3600 on the Nasdaq 100; a break of those levels would likely send the indexes back to their May lows. So far, earnings warning season hasn’t delivered any huge surprises, so barring a warning from a market leader, the May uptrend lines should hold. However, we should note one troubling similarity between this summer’s rally and the March peak: in both cases, the Nasdaq 100 went on to a new high, while the Nasdaq did not. This divergence shows weakness in the recen

t rally, but doesn’t necessarily mean a huge decline is coming. To the upside, the Nasdaq faces resistance in the 3950-4000, and then again at 4100.

We noted last night that the Dow and S&P 500 finished just below support at 11,200 and 1490, respectively, suggesting that the blue chips could be in for further weakness. The Dow sold off sharply this morning, but found support around 11,100 and is again running into resistance at 11,200. The Dow may be forming a head-and-shoulders top here, but so far is being held up by JP Morgan. Support can be found every 100 points on the Dow, but critical support is around 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 11,300 and 11,400, and on the S&P, 1500 and 1507. The ISDEX closed below 790-800 support yesterday, which now becomes resistance again. Critical support on the ISDEX is just above 700, which is now the intersection of the index’s March downtrend and May uptrend lines. To the upside, the ISDEX’s recent rally was capped by the 50% retracement level of 850.

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