Market Battles Back From Steep Decline

Stocks fell sharply again on Thursday, but this time they came back all the way, with tech stocks leading the way.

The ISDEX rose 3 to 102, and the Nasdaq climbed 28 to 1374. The S&P 500 added 6 to 927, and the Dow slipped 11 to 8801. Volume soared to 2.11 billion shares on the NYSE, and 2.28 billion on the Nasdaq. Decliners led 19 to 12 on the NYSE, and 20 to 14 on the Nasdaq.

After the close, Dell raised estimates by a penny but said business remains tough; futures jumped on the news. Juniper , Powerwave and Sonus beat estimates, DoubleClick missed revenue estimates, and Rambus matched estimates.

During the day, Yahoo gained 6% after beating estimates and reaffirming guidance. The stock initially traded lower after Merrill Lynch downgraded the company based on valuation.

VeriSign surged 19% despite warning.

SAP fell 7% on a warning, and Redback and fell despite topping estimates. McAfee parent Network Associates warned.

Scansoft gained 10% on a deal with Microsoft.

Oracle gained 5% despite saying that business in Europe is weak.

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.

The market is set up for a nice reversal tomorrow, but we’re not sure if this rally has far to go. For starters, we haven’t had much in the way of ‘real’ selling to the downside. No 90% downside days, and just three -1000 TICK readings on the NYSE and only one on the Nasdaq. Any rally at this point is likely to be stopped at 950-970 on the S&P, that massive head and shoulders neckline in the first chart below. A close above that level would be impressive, but we think that resistance may be too much for the market to overcome, although we’d gladly be wrong on that. To the downside, 1315-1326 support held nicely on the Nasdaq today (second chart). If that goes, 1296, 1250 and 1200 are potential targets, and 1200 looks like particularly good support (third chart), and could also line up with the 800 level on the S&P 500 (first chart again). Another potential support to think about is 876, the level at which the Federal Reserve recently calculated fair value on the S&P. Resistance levels are 1400 and 1430-1435 on the Nasdaq (second chart again), 935, 950, 965 and 980 on the S&P (fourth chart), and 9000-9050 and 9300 on the Dow (fifth chart). Today’s lows were 900 on the S&P, 8605 on the Dow, and 1323 on the Nasdaq, all fairly good support levels.




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