IBM Plunges – And Tech Stocks Rally

IBM plunged 10% on an earnings warning Monday – and technology stocks came back from a 2% opening drop to end the day on the plus side.

The ISDEX rose 1 to 149, and the Nasdaq gained 15 to 1785. The S&P 500 added 2 to 1125, and the Dow slipped 22 to 10,249, but 129 points off the index’s low. Volume was unchanged at 1.1 billion shares on the NYSE, and rose to 1.6 billion on the Nasdaq. Advancers led 18 to 13 on the NYSE, and 19 to 16 on the Nasdaq.

After the close, Compaq , Microchip and JDA preannounced better than expected results, Citrix and JNI warned, and Broadcom announced the acquisition of Mobilink Telecom.

During the day, IBM plunged 10% on a warning, breaking down out of a 9-year trendline (see market commentary below for chart). But other big techs didn’t follow. Microsoft , finished 3 points off its low, up 2.4% on the day.

Intel slipped 12 cents on a Salomon Smith Barney technical downgrade – IBM received one last week.

Sycamore surged 17% on a Lehman Strong Buy rating.

Loudcloud plunged 21% after suspending guidance after the closing of Atriax, one of its largest customers. Ameritrade rose 2% despite warning and announcing the acquisition of Datek.

RSA gained 10% on optimism about earnings.

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.

One amazing day. IBM warns and gaps below a 9-year trendline (see first chart below) – and tech stocks come back to finish the day in the black. The Nasdaq (second chart) gapped below its lower channel line – but then recovered to close back within the channel. It’s still a down channel, however, and the Nasdaq won’t break out of it until about 1830. Resistance is 1790-1805, and support is 1750. The S&P’s lower channel line (third chart) was the one support that did hold today, and is thus one to keep an eye on. That line should be just under 1110 tomorrow; call it 1107. 1119 is first support, and 1132-1140 is critical resistance. The Dow (fourth chart) came nowhere near its lower trendline, which should be at about 10,030-10,050 tomorrow. 10,180 is first strong support, first resistance is 10,275, and 10,325 is critical resistance. Today was the end of the first significant Bradley cycle turn window since early January, but market direction remains unclear; keep an eye on the down channel boundaries for clues. The persistent weakness during what is usually a seasonally strong period has us thinking that the April rally may not be a very impressive one, and that an intermediate term top may already be in place for the Nasdaq, if not the other major indexes.




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