Nasdaq Hesitates At Key Level

The Nasdaq struggled at its 200-day moving average Friday in higher volume.

The ISDEX was unchanged at 770, and the Nasdaq rose 8 to 3949, just below its 200-day moving average. The S&P 500 slipped 2 to 1494, and the Dow declined 13 to 11,042. Volume declined slightly to 400 million shares on the NYSE, but rose 15% to 712 million on the Nasdaq. Decliners led 14 to 10 on the NYSE and 18 to 16 on the Nasdaq. The Federal Reserve meets on Tuesday, but the almost universal opinion is that the Fed will leave rates unchanged. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our new after hours trading site.

Portal Software , weighed down all week by concerns about the company’s earnings report, beat estimates after the bell Thursday by 2 cents with 3-cent earnings. The stock rose to 60 in after-hours and opened Friday at 59, and several brokerages made positive comments, but the stock fell victim to profit-taking, down 2 11/16 to 53 3/4.

Open Text gained 2 7/8 to 25 15/16 after blowing out estimates by 11 cents with 16-cent earnings. Agile Software beat estimates by a penny with 3-cent earnings, and the stock gained 6 3/4 to 63 3/4.

Fiber optics stocks continued to show strength. Corning gained another 8 3/8 to 297 7/8 after closing at a new high Thursday on news of a 3-for-1 stock split. Ciena continued to gain on better-than-expected earnings, adding 2 13/16 to 182. That stock too closed at a new high yesterday. gained another 7/32 to 1 3/8, staying above the important $1 level on speculation that the company could find a buyer.

Customer relationship management (CRM) stocks had a good day on positive analyst comments. Kana Communications rose 1 5/16 to 41 1/16, continuing a strong run. Art Technology Group gained 2 1/4 to 97 5/8 and Interwoven rose 2 1/8 to 78 3/4.

eBay finally took a breather after its strong recent run, off 1 9/16 to 61 1/2. Investors have been bidding the stock up on optimism about global business prospects. Yahoo continued to lose ground on a lukewarm Prudential recommendation, slipping 1 9/16 to 129 9/16.

i2 Technologies continued to struggle at resistance in the mid-150s, losing 6 15/16 to 150 11/16.

Healtheon/WebMD gained 1/8 to 13 3/8 on reports that it will lay off about 100 employees.

Some technical comments on the market: The Nasdaq has crossed above its 200-day moving average four times during this correction, not including today. Twice it closed the previous day quite a bit below the 200 DMA and gapped up through it – both times it went on to post decent gains. The other two times it closed just below the line, as it did yesterday – and both times it peaked in the next day or two and then reversed. One of those times it went down significantly, the other time it only declined for three days. Can the index end that trend this time? The way to bet would be not likely: a strong crossing of the line seems to be key to a continuing uptrend, and volume and chart patterns have not been generally supportive of a major move here. Today is an options expiration day; the last two have been down days, so some trends are against the Nasdaq here. The Nasdaq has been stuck in a narrowing trading range and has yet to establish firm direction either way. The index may be forming a bearish flag pattern in the daily chart since bottoming at 3521 two weeks ago, giving the index potential for more downside, as much as 600 points. A break below 3800 wou

ld be a warning sign. However, a flag pattern has at most three weeks to form, so if the Nasdaq can avoid a sell-off for one more week, we have some hope here. Don’t expect much of a rally out of the Fed meeting, barring a return to a neutral position on future rate hikes, as the market seems to have already priced in no change in rates or outlook. The ISDEX also may be forming a bearish flag pattern here, signaling potential further downside on that index. Key resistance is now around 800, the lower boundary of a broken bearish rising wedge. Support on the ISDEX is at 693-700, 650 and 600; a break below 700 would just about break the bearish flag pattern. The S&P is once again back above 1480-1490 resistance and is just below 1500. The Dow needs to stay above the 10,950 area to preserve the upside breakout of the diamond formation, and so far it has done that. Resistance on the Dow is just under 11,200.

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