Storage Stocks Hit

Lack of earnings guidance from Brocade hit storage stocks hard on Thursday. Blue chips gained on economic numbers that were better than expected, despite analyst concerns about GE.

The Nasdaq was fractionally lower at 1221, but the S&P 500 rose 15 to 854, and the Dow gained 155 to 7997. Volume declined to 1.62 billion shares on the NYSE, and 1.66 billion on the Nasdaq. Advancers led 24 to 8 on the NYSE, and 17 to 14 on the Nasdaq.

After the close, Manugistics and Cognos beat estimates. SBC announced layoffs and CapEx cuts.

During the day, storage stocks were battered after Brocade declined to issue guidance at a conference. Brocade lost 20%, and EMC and QLogic fell 11-12%.

Cisco lost 5% on negative comments by Goldman Sachs.

Broadcom fell 15% on negative analyst comments.

Nortel and Redback hit new lows on warnings.

Yahoo and Nokia gained on positive analyst comments.

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.

The Dow (first two charts below) should face very tough resistance at 8051. If it can make it through that level, 8217-8247 would be the next target; above 8247, 8700-9000 would come into play. 7922, 7871-7891 and 7665 are support, and 7532 is critical. As an aside, the conflicting bearish and bullish candlesticks that showed up in early August (see arrows in first chart) had an interesting resolution: both the upside (9050) and downside (7600) targets were eventually met, so both the “three black crows” and “three white soldiers” proved to be equally predictive. The Nasdaq (second chart) put in a surprisingly ugly candlestick today after yesterday’s bullish reversal. A down day tomorrow, particularly on a gap down, could indicate that the rally is over for techs. 1251-1270 is critical resistance for the Nasdaq. 1206 is first support, and 1195 is critical. The S&P (fourth chart) has strong resistance at 857, and 870 is critical resistance. Support is 844, 830-833, and 814-815.





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