Stocks Battered Again

Stocks were battered again on Wednesday on a cautious outlook from Novellus and more accounting worries.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 2 to 121, and the Nasdaq lost 27 to 1624. The S&P 500 fell 6 to 1067, and the Dow dropped 58 to 9923. Volume rose to 1.07 billion shares on the NYSE, and 1.41 billion on the Nasdaq, the second straight sell-off in rising volume. Decliners led 18 to 13 on the NYSE, and 21 to 13 on the Nasdaq.

Novellus fell 7% after saying it expects to exceed second-quarter guidance, but the company declined to provide third-quarter guidance. Applied Materials and KLA-Tencor also fell.

PayPal surged 9% to a new high of 29.

NVIDIA gained 3.8% on positive comments from Prudential.

Cisco fell 4.5% on a Dresdner sell recommendation.

Nortel fell 6.8% after slightly lowering estimates, and JDS Uniphase dropped 5.5% on a downgrade.

SignalSoft doubled on news that it will be acquired by Openwave .

Teradyne added 1% on a JP Morgan Buy rating.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the internetstockreport.com story link at the top of the newsletter.

The S&P 500 (first chart below) is barely holding onto the lower trendline of a potential bear flag; any downside at all tomorrow would look bearish, and 1072-1075 looks like tough resistance. The one point in the bulls’ favor is the end-of-the-month/start-of-the-month rally period, which could give the market a positive bias until early next week, but otherwise the market continues to look very weak. The Nasdaq (second chart) broke 1640 support today and doesn’t have another strong support until 1600 at this point. 1640 is now important resistance. The Dow (third chart) looks like it too has started another wave down. 9890 and 9800 are next supports, and 10,078 is critical resistance. You’d think that in the midst of all this weakness that gold would be doing well, but the yellow metal (fourth chart) is running into major resistance at 327.50. The first strong support on the HUI (fifth chart), the gold stock index, is 130, about 10% down from here. It’s hard to imagine gold going down before the stock market puts in a clear bottom, but stranger things have happened.

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