Stocks Flip Flop Again

Stocks flip flopped again on Tuesday, only they went from up to down this time.

The Federal Reserve is meeting today and tomorrow and is widely expected to leave interest rates unchanged. The decision will be announced at 2:15 p.m. tomorrow.

The ISDEX lost 3 to 101, and the Nasdaq fell 36 to 1423. The S&P 500 dropped 16 to 976, and the Dow lost 155 to 9126 after being up 132 at one point. Volume declined to 1.5 billion shares on the NYSE, and 1.87 billion on the Nasdaq. Decliners led 18 to 14 on the NYSE, and 21 to 13 on the Nasdaq.

After the close, Micron fell after missing estimates. GE said its quarter is on track, and 3Com and Palm topped estimates.

During the day, fell 12% on competition from Yahoo lost 9%.

University of Phoenix Online gained 5% on its earnings report.

Storage stocks were hit hard, with big losses in Qlogic and Emulex .

Merix plunged on a warning.

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.

We may be nearing that elusive capitulation, but the next few days could be rough getting there. Or so we hope, because the better the bottom, the better the coming summer rally will be. At this point we should probably mention that index futures remain a problem for the market, even though expiration was last Friday. Why? Because volume in the new near contract was three times normal last week, which means that losses were just rolled over and are still on the books. This is especially important tonight because one firm that follows Dow futures closely reports that futures traders “are close to losing” the battle to hold the index up. If they lose that battle, our 8800 target on the Dow (first chart below) could well be exceeded. 9000 is viewed as a critical support level by those following the futures, and below that level, repatriation, or foreign selling, could accelerate. Again, give us a few days of -1000 TICK readings and a buying pressure (+DI) reading under 10 on the Dow, and we’ll be happy. Oh, and a higher VIX (second chart) would be nice too, since it’s still below its recent high. Levels to watch are 965, 944, and 923 on the S&P (third chart), and 1357-1387 or lower on the Nasdaq (fourth chart). To the upside, 990 and 1000-1005 on the S&P and 1470-1480 on the Nasdaq look like very tough resistance.




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