Intel Comments Send Chips Surging Again

Chips stocks had yet another strong day, after Intel CEO Craig Barrett reiterated his prediction that business will pick up in the second half of the year.

The ISDEX http://www.wsrn.com/apps/ISDEX/ gained 1 to 211, and the Nasdaq climbed 19 to 2087. The S&P 500 rose 4 to 1220, and the Dow added 41 to 10,551. Volume rose to 1.23 billion shares on the NYSE, and 1.67 billion on the Nasdaq. Advancers led 17 to 12 on the NYSE, and 18 to 17 on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

Intel surged 1.37 to 32.12 on Barrett’s comments that PC sales will pick up on back-to-school and holiday sales and the launch of Windows XP. PMC-Sierra rose 3.61 to 36.95 news that it will be added to the S&P 500 after the close.

Research In Motion bolted 3.72 to 26.84 on positive analyst comments.

Cisco lost .15 to 20.15 on CS First Boston comments that the company may drop its prediction of 30%-50% long-term growth when it reports on Tuesday. The stock was rejected at critical 20.75 resistance.

EarthLink lost .94 to 15.41 on news that Sprint and Apple will sell shares in the company.

NetIQ rose 2.87 to 39.75 on Dain Rauscher Wessels comments that business at the company is showing strength.

Sun Microsystems rose .71 to 18.06 on positive comments from Merrill Lynch.

Computer Sciences surged 3.61 to 37.15 after topping estimates but lowering its forecast.

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This kind of whipsaw action around major trendlines is a little worrisome, and with the market overbought and entering a major turn window next week, we remain cautious on the market. The most bizarre thing about today’s action was that the Nasdaq (first chart) broke its downtrend line, gave it up, and then climbed back above it in the last 30 minutes of trading on rumors of more upgrades tomorrow. That’s not bullish action; that’s traders afraid of missing out on another rally. Support should now be found at 2075, and 2105 is first resistance. The Nasdaq, Nasdaq 100, and S&P 500 (charts two through four) barely did any damage to their bearish rising wedge patterns on this morning’s “gap and trap,” so we will leave those bearish patterns in place. This week has smacked of distribution, with big gaps up that fade as traders sell into them. The last time we saw this kind of action was right before the market tanked in February. Hopefully the outcome will be better this time, but Wall Street upgrades that are met by selling are always deserving of suspicion. The S&P (fifth chart) faces tough resistance at 1225, and the 1205 level should be support. The Dow (sixth chart) continues to face tough resistance at its main downtrend line around 10,600, and 10,430-10,475 is first support.

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