Stocks Mixed In Pre-holiday Trading

Stocks were mixed Friday morning in advance of the Fourth of July holiday.

The ISDEX declined 2 to 728 and the Dow fell 24 to 10,373, largely on weakness in IBM. But the Nasdaq rose 54 to 3931 and the S&P 500 gained 4 to 1446. Volume declined 10% to 420 million shares on the NYSE, but fell only slightly to 660 million shares on the Nasdaq. Volume was expected to increase in the afternoon on S&P and Russell index rebalancing. Advancing issues led 15 to 11 on the NYSE and 20 to 14 on the Nasdaq. The markets will close at 1 p.m. on Monday, and the Market Close will be published in place of the Midday Report.

Intraware fell 3 19/32 to 15 5/32. The company beat analyst expectations after the close on Thursday, but Banc of America downgraded the stock to Buy from Strong Buy based on cash burn concerns. Liberate gained 15/16 to 24 3/4 on better-than-expected numbers. The infrastructure software company is 47% owned by Oracle .

Verio fell 4 5/16 to 55 3/16 on concern that NTT Communications might not extend its tender offer for the company. However, Reuters reported that NTT will extend the offer until July 14.

Check Point Software , a leader in the Nasdaq’s and ISDEX’s recent advance, gained 6 15/16 to 217 after announcing a 2-for-1 stock split, payable July 25.

USinternetworking gained 5/8 to 20 1/4 after First Analysis Securities initiated coverage with a Strong Buy and $37 price target, citing the company’s strong business model. gained 1/16 to 2 1/2 on news of a $3 million alliance with Hewlett-Packard .

NorthPoint Communications gained 1/16 to 10 7/8 despite a Deutsche Banc Alex. Brown downgrade to Market Perform from Buy.

The IPO of Chinese portal received a lukewarm reception, falling to 12 7/8 after pricing at 15 1/2.

CDNow gained 3/16 to 3 on word that the company is continuing discussions to find an investment or merger partner.

Some technical comments on the market: The Dow broke another bearish flag pattern to the downside this morning, but found support at 10,336, its bottom of last week. While the index could have room to rally if it can get above 10,400, it may be forming another bear flag here. Again, 10,400 is the lower boundary of the Dow’s bearish “diamond” pattern, but must be broken by 3% on rising volume to be considered definitively broken. The index has support in the 10,200-10,300 range, the lower boundary of its bearish descending triangle. The index has run into trouble recently at 10,600, and turned back yesterday just over 10,500. It’s hard to imagine this ending well or lasting more than a couple more weeks, but wait for the break to make sure. As of yesterday, we’ve had five days of selling on higher volume in the last 10 days on the NYSE, a sign that the pros are selling. The Nasdaq has had fewer of these “distribution” days, but nonetheless is vulnerable to further selling until it can get above 4000 and take out 4073. The Nasdaq negated its bearish flag pattern yesterday and has now flashed a MACD buy signal, but caution is advised. Recent support on the index is 3832-3838, but key support is 3725 and 3585. The S&P 500 also is forming a diamond in the weekly charts, with upper and lower boundaries of 1480 and 1370, respectively. The S&P looks better than the Dow, but may be forming another flag itself, and its still has a MACD sell signal. The ISDEX is holding up very well and remains above important support of 700; a clean break of that number would give the ISDEX room to 600, while a close above 790 would be bullish.

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