Nasdaq, ISDEX Give Back All Of Wednesday’s Gains

Technology and Internet shares continued to struggle on Thursday, as they gave back all of their gains from Wednesday and then some.

The ISDEX lost 14 to 791, and the Nasdaq dropped 46 to 3850. The S&P 500 slipped 6 to 1445, but the Dow rose 26 to 10,714 on a bullish outlook from 3M. Volume rose to 495 million shares on the NYSE, but slipped to 720 million on the Nasdaq. Decliners led 15 to 9 on the NYSE and 22 to 13 on the Nasdaq. CMGI and Liberate report earnings tonight. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our new after hours trading site. fell 2 1/8 to 21 5/16 in advance of what is expected a negative piece on CBS’ 48 Hours show tonight. Celebrity spokesman William Shatner will reveal that he has never used the site to buy discount airline tickets. The show is also expected to focus on customer complaints; the company was removed from the Better Business Bureau earlier this month for failing to eliminate complaints such as misrepresenting products, not providing promised refunds, and not correcting billing errors, according to the Wall Street Journal and other news reports.

Engage rose 29/32 to 8 31/32 after trading as high as 10 3/8 after beating earnings estimates by 14 cents with a 14-cent loss. The company also announced that it would lay off 175 employees, or about 13% of its workforce, and reorganize from five units to two, moves it said would save $21 million a year. The company will take a first quarter charge of about $3.5-4 million. But DoubleClick did not follow Engage higher, slipping 1 1/8 to 39 1/8.

eBay gave back 4 15/16 to 71 5/8 after soaring more than 10 points yesterday on a bullish long-term growth forecast. CS First Boston downgraded the stock to Buy from Strong Buy, but upped its price target to $90 from $72.

PurchasePro gained 1 3/8 to 74 1/2 after announcing a 2-for-1 stock split. The stock soared 11 points yesterday on a Lehman Brothers Buy rating and $120 price target.

Liberate surged 1 3/16 to 29 7/8, but down from an intraday high of 33 1/2, on news that AT&T Broadband will use Liberate’s software platform for an interactive TV services pilot effort.

Foundry Networks rose 3 3/8 to 61 7/8 on news that Yahoo will use the company routers and solutions for GeoCities.

Some technical comments on the market: The market is not looking very good here, and we’ll explain why and what the bulls need to do to regain control. All three major indexes have failed at some pretty important levels. We’ll begin with the Dow, which is the most troubling of the three. The Dow three days ago broke back inside the upper boundary of the diamond pattern (just above 10,800); the next day it touched both the upper and lower diamond boundaries, reinforcing the pattern; and then yesterday it broke the pattern to the downside. Today it retraced to the lower boundary again (10,750), only to fail. This consolidation beneath a major topping pattern could be a prelude to further selling; to reestablish control, the bulls need to get the Dow through 10,750-10,850 resistance. To the downside, a break of the October 1998 trendline at 10,500 would be a huge negative. The S&P 500 is consolidating beneath its October 1998 trendline (1450) broken yesterday. Next support is 1435-1440 on the S&P 500, then 1425, 1414, and then critical support at 1405: the line connecting the March (1325),

April (1340) and May (1361) bottoms. To negate this bearish scenario, the S&P needs to get above 1460 and stay there.

The Nasdaq turned back right at the 38% retracement level of 3913 yesterday and then gave back more than 100% of yesterday’s gains today. That sounds more like a technical bounce than a meaningful rally. To negate the scenario, the Nasdaq needs to get above 3913. Other Fibonacci levels from the 4259-3702 decline to think about: 3980 (50%) and 4047 (62%). To the downside, 3794-3825 is a big area for the Nasdaq to hold, the range of the broken May uptrend line. If that level doesn’t hold, the Nasdaq could be set up for a retest of its old October 1998 uptrend line at 3700. Below 3700, the Nasdaq could find a bottom in the 3521-3600 range; lower than 3500, and the May lows (3042) would likely be retested. The ISDEX has so far held support in the 787-800 range; much lower and that area will become resistance again. Below that is 750 support and then the May uptrend line at about 720. If the ISDEX can clear 800 resistance with any style, it could have room to 850, the 50% retracement level.

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