Stocks Gain On Retail Sales

Stocks extended their gains Wednesday on a stronger-than-expected retail sales report.

The ISDEX rose 5 to 176, and the Nasdaq climbed 11 to 1903. The S&P 500 rose 2 to 1141, and the Dow added 72 to 9823. Volume rose to 1.42 billion shares on the NYSE, but slipped to 2.16 billion on the Nasdaq. Advancers led 18 to 12 on the NYSE, and 20 to 15 on the Nasdaq.

After the close, Applied Materials fell after missing earnings estimates but topping revenue estimates. The company warned for next quarter, and said it expects capital spending to fall 30% in 2002, which may not be taken well by a market betting on a tech recovery next year. IBM fell ahead of its analyst meeting after the close, and was unchanged after providing no earnings guidance at the meeting. Aether and Agile topped estimates. Also after the close, the Senate blocked the Democratic fiscal stimulus package, another potential negative for stocks.

During the day, Network Appliance and BEA Systems fell on their earnings reports, Sycamore rose on its report, and PurchasePro fell on its report.

Citrix fell after Microsoft inked a deal with a privately held competitor.

Micron fell on a Bank of America downgrade.

Yahoo rose on deals with Overture and SBC . Amazon surged on the strong retail sales data and a settlement with eBay .

Hewlett-Packard surged on better-than-expected results.

And Dell rose ahead of its earnings after the close tomorrow.

Some technical comments on the market: Note: We include charts in the technical market commentary. If you can’t get the charts via the e-mail newsletter version, try this link:

Doji stars today in the Nasdaq and S&P 500. A down day tomorrow from the open, particularly on a gap, would produce an evening star, a pattern that has marked many tops in this bear market. The one bullish factor is that the PC ratio actually rose today, showing that sentiment can still turn bearish quickly. But one sentiment indicator tracked by a few traders – Rydex funds – is at complacency levels that has marked tops at least twice this year, and could take some time to work off. And the market is overbought and due for at least a small pullback, just in time for a potential cycle turn window tomorrow-Monday. And as we noted yesterday, the market is closing in on some very interesting levels, particularly on the Nasdaq. If this is just a wave 4 countertrend rally on the Nasdaq, it can’t go higher than the bottom of the first wave down from the May top, which is at 1934. It got as high as 1922 today. If it goes higher than 1934, something else is going on, probably a higher-degree countertrend rally that could last for some time and go to at least 2300. The Nasdaq also would hit its .618 Fibonacci retracement level from the May top at 1968; above that level, the move would become a trend in its own right. The Nasdaq hasn’t cleared that important Fibonacci level on any rally since the bear market began, so those are two very big levels to watch. For the S&P and the Dow, the bottom of wave 1 is 1164 and 10,120, and the .618 retracement levels are 1173 and 10,093.

The Dow (first chart) just barely closed above the upper trendline of a potential broadening top today; can it hold that level? Almost any move down would fall back into that pattern. First resistance is 9859, first support will be at about 9820, and 9740 is another critical level, the downtrend line broken today. The Nasdaq (second chart) has support at 1867-1875, 1855, and then 1840. First resistance is 1922, and then the all-important level of 1934. The S&P (third chart) facew resistance at 1145-1155 (today’s high was 1148), and then 1164-1173. Support is 1132, and then 1120-1126.

Special report: For a free introduction to technical chart patterns and an overview of last year’s action in the stock market, visit,1785,2571_500051,00.html.

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