Techs, Nets Bounce Off Lows

Technology and Internet stocks bounced off their worst levels on Wednesday, as traders ignored earnings warnings from Applied Materials, JDS Uniphase and Sycamore Networks.

The ISDEX http://www.wsrn.com/apps/ISDEX/ fell 2 to 3337, and the Nasdaq rose 3 to 2431. The S&P 500 lost 11 to 1307, and the Dow dropped 116 to 10,786. Volume was unchanged at 470 million shares on the NYSE, but rose to 880 million on the Nasdaq. Decliners led 20 to 13 on the NYSE, and 17 to 10 on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

Sycamore Networks surged 2 7/16 to 25 after beating estimates by a penny with 6-cent earnings. Forward guidance was not as bad as feared. Applied Materials rose 5 to 46 after beating estimates and guided future results sharply lower. Goto.com , up 3/16 to 10 3/4, also beat estimates.

JDS Uniphase slipped 13/16 to 37 11/16. The newly combined entity of JDSU and SDL guided estimates lower.

Openwave fell 4 11/16 to 53 1/16 after competitor Comverse Technology won a contract from AT&T Wireless .

[email protected] tacked on 9/16 to 5 13/16 on a deal with AT&T .

EarthLink rose 7/32 to 9 11/32 after Microsoft said it is looking at ISP acquisitions now that valuations have come down.

E.piphany rose 2 1/8 to 25 3/4 on several contract wins.

S1 rose 1 to 7 15/16 despite issuing an earnings warning. USinternetworking rose 7/16 to 2 11/16 after topping estimates. MyPoints.com , unchanged at 1 7/16, and NBC Internet , up 5/32 to 2 3/4, also beat estimates. Be Free , off 3/32 to 2 7/16, matched estimates. Tanning Technology , off 3/8 to 5 3/4, matched estimates but warned.

eBay , up 2 1/16 to 49 1/2, continued to rise after a bullish presentation by CEO Meg Whitman yesterday.

Ciena , up 5 1/16 to 74 1/4, reports earnings before the open tomorrow, and Dell , down 5/8 to 21 5/8, reports after the close tomorrow.

Some technical comments on the market: Note: We are now including charts in the technical market commentary. If you can’t get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

The Nasdaq bounced today exactly at its 1990 logarithmic trendline at 2388 (first chart), critical support for the index. Here’s a link to the biggest chart we can find of that line, taken a point above this morning’s lows: http://cache.wsrn.com/images/AHT/compx902142.gif. That line is probably the single most important support for the bull market of the 1990s, and a line we do not want to see definitively broken. A close of 2340 or so would be enough to break that line, but the index could meet with strong support at 2300, where the Fed cut interest rates for the first time last month. To the upside, the Nasdaq needs to get back above its September logarithmic downtrend line at about 2525 (second chart).

The S&P 100 and 500 (first and second charts, not updated due to a data glitch) took out their uptrends from December this morning, not an encouraging sign for the overall market. We will look to see if those indexes can recover or reform those uptrends. The S&P 500 found support at its broken September downtrend line (third chart) at about 1305 this morning, a plus.

The Dow has so far managed to hold on to its October uptrend just under 10,800 today, the only major index that has been able to maintain its uptrend. To the upside, we want to see the Dow take out 11,000 resistance convincingly soon. That is the upper boundary of what could be a bullish ascending triangle, with upside potential to 11,700 to 12,300. That pattern is quickly running out of room, however. A close above 11,007 would also be bullish under Dow Theory, the oldest school of technical analysis, particularly if the Dow Transports can stay above 3000; the Trannies continue to hold above that level. But the 11,000 level has been one tough obstacle for the Industrials, reflecting its importance to the health of the market and the economy as a whole.

Special report: For a free introduction to technical chart patterns and an overview of last year’s action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.

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