Cisco Sends Stocks Soaring

Cisco’s earnings report sent stocks soaring on Wednesday. The Nasdaq gained 7.8% and the Dow posted its biggest point gain since September 24.

The ISDEX soared 12 to 127, and the Nasdaq surged 122 to 1696. The S&P 500 bolted 39 to 1088, and the Dow gained 305 to 10,141. Volume rose to 1.5 billion shares on the NYSE, and 2.39 billion on the Nasdaq. Advancers led 20 to 11 on the NYSE, and 24 to 10 on the Nasdaq.

Cisco soared 24% on triple average trade, its biggest up day since October 3, after beating pro forma earnings estimates, even though revenues came in a little light, and the company’s forward guidance was a little lower than estimates.

Intel and Microsoft were two of many leading stocks to post gains of 10% or higher.

QLogic led a very strong storage sector, soaring 26% on better than expected results and guidance. Emulex , Brocade and Network Appliance all posted similar gains.

Aether , WebMD , TMP Worldwide and Compuware all gained on their earnings reports.

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.

Up/down volume and the advance/decline line weren’t super bullish today, but that’s about our only quibble with today’s action. The Nasdaq (first chart below) even negated its recent bearish “three black crows” candlestick pattern by taking out the top of those three candlesticks (1673), a bullish development. A rally this strong is likely to see some follow through buying, so we’ll focus today on how deep any pullback is likely to be, and what resistance levels could indicate a resumption of the uptrend. The Nasdaq should not want to go below 1640 at this point, and 1673 is also a support level. The index closed right at critical 1696 resistance, so any move up tomorrow could be the start of something. There’s resistance at 1725-1734, 1757, and a critical downtrend line just under 1780. The Dow (second chart) broke out of a two-month down channel at 10,050 today, a bullish development. That line now becomes critical support, at about 10,040 tomorrow. First resistance is a small rising trendline at 10,160, and then the 50-day at 10,276. The S&P 500 (third chart) should not want to go below 1064 at this point. 1074 is first support, 1091 is first resistance, and a break above 1100 would be bullish. And finally, the biggie: The S&P 100 (fourth chart) must get back above 547-548. The one thing that could limit this rally is that max pain – the point where most options expire worthless – on the Nasdaq 100 tracking stock (QQQ) is 32, less than 1% from today’s close. Options expire in a week and a half, so any rally may pull back to this level by the end of next week.



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