Stocks Hold Gains

Stocks fought off profit-taking on Monday to end the day higher.

The Nasdaq rose 10 to 1220, the S&P 500 gained 6 to 841, and the Dow climbed 27 to 7877. Volume plunged to 1.18 billion shares on the NYSE, and 1.2 billion on the Nasdaq. Advancers led 16 to 15 on the NYSE, and 16 to 15 on the Nasdaq. Upside volume was 57% on the NYSE, and 63% on the Nasdaq.

After the close, Unisys rose after beating earnings estimates but coming in light on revenues.

During the day, IBM slipped after Morgan Stanley cut earnings estimates.

Intel slipped ahead of tomorrow night’s earnings report.

AOL lost 4% on concern about competition from MSN.

Nortel gained 10 cents to 56 cents on a deal with SBC .

Seagate filed for an IPO two years after being taken private.

Business Objects and Interwoven rose 7% each on positive analyst comments.

Adtran fell 5.8% despite beating estimates.

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.

Some positive signs for a continued rally, but we’d prefer a pullback here to build a stronger base. The indexes would all form inverted head-and-shoulders bottoms if they pulled back to 7500-7600 on the Dow (see first chart below), 800-815 on the S&P (second chart), and 1150-1170 on the Nasdaq (third chart). However, if any pullback goes deeper than 7460 on the Dow, 796 on the S&P, and 1148 on the Nasdaq, new lows would become likely. To the upside, the Dow faces resistance at 7900, 8000-8050 and 8217; the S&P at 844, 850-857 and 870; and the Nasdaq at 1222 and 1240-1250. Several big financial stocks are reporting earnings tomorrow morning, and the banking index (fourth chart) faces a lot of overhead resistance here. On the subject of Thursday and Friday’s back-to-back 80% upside days, Paul Desmond of Lowry’s Reports called the signal “good enough to support a rally lasting 6-8 weeks.” Technically, this bottom has had a number of positives that we haven’t seen before: lower volume than the July lows, with a bottom that has taken multiple days to form; we had the highest non-expiry equity put-call ratio close since October 8, 1998 (.982 on October 3); and we have a potential completed Elliott wave count off the highs earlier this year. Not enough for a major bottom, as we said last Wednesday, but it looks like it could last a while, particularly if we get our hoped-for pullback.





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