Buyers Send Dow Back Above 9000

Investors continued to buy stocks despite warnings and downgrades, sending the Dow back above 9000 for the first time in six weeks.

The Nasdaq climbed 13 to 1422, the S&P 500 rose 13 to 962, and the Dow gained 96 to 9053. Volume rose to 1.36 billion shares on the NYSE, and 1.84 billion on the Nasdaq. Advancers led 20 to 11 on the NYSE, and 19 to 14 on the Nasdaq.

After the close, Tech Data and Marvell beat estimates.

During the day, Microsoft gained 1.8% on an upgrade, but chip stocks fell after Salomon Smith Barney lowered its forecast for the sector. Intel lost 2%.

JD Edwards and Synopsis rose on better than expected results.

Handspring and Palm were the latest penny stocks to soar, and Ericsson and Verisign continued to gain.

AOL lost 2% on more investigation reports. Cree lost 7% on a downgrade.

Ciena lost 8% after missing revenue estimates and warning.

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

About the only thing certain in this market is that when it finally corrects, it will likely correct hard. Call buying remains relentless, unlike anything seen in last September’s rally, with the equity-only put-call ratio hitting a very bearish .30 today before rising to close the day at a still-low .417, the longest streak below .50 since August 2000. The S&P and Wilshire 5000 (first two charts below) are pushing through the necklines of multi-year head and shoulders tops; those breakouts are not likely to hold unless volume picks up substantially. In the intraday charts, the Dow and S&P (third and fourth charts) seem to be wedging higher in Elliott wedges, a pattern that usually predicts a significant correction. One more pop to the upper trendlines would make those patterns seem just about complete; potential targets are 968 S&P and 9100 on the Dow. Again, we do not expect the S&P to close much above 970; if it does so with volume, 1050 is within the realm of possibility. A move below 9000 on the Dow and 950 on the S&P would likely signal the start of a correction, and 925 on the S&P and 8800 on the Dow are critical support (see the daily charts, charts five and six). The Nasdaq (seventh chart) has resistance at 1425 and 1440, and support at 1400-1410, 1370, 1355 and 1325 (critical).







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