Traders Take Profits

Traders took profits in blue chips on Tuesday following two days of strong gains, but tech stocks managed to end the day higher.

The ISDEX http://www.wsrn.com/apps/ISDEX/ rose 1 to 166, and the Nasdaq added 6 to 1866. The S&P 500 slipped 7 to 1146, and the Dow fell 153 to 10,433. Volume declined to 1.54 billion shares on the NYSE, and 2.06 billion on the Nasdaq. Advancers led by a few shares on the NYSE, and by 18 to 16 on the Nasdaq.

After the close, the highly contested merger of Hewlett-Packard and Compaq won the support of the all-important Institutional Shareholder Services. Storage stocks fell on a warning from McData , and Amazon fell after the company announced the resignation of CFO Warren Jenson.

During the day, Nokia slipped fractionally after scheduling a mid-quarter update for March 12, the day before an investor conference presentation, raising fears that the company may warn.

Scientific-Atlanta fell 9% after a UK set-top box maker warned.

Brocade and McData both fell on the latest salvo in a patent suit between the two.

Intel rose 3% on positive analyst comments.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the internetstockreport.com story link at the top of the newsletter.

10,550-10,560 support didn’t hold today, so the Dow (first chart) pulled back sharply, as expected. First strong support is 10,300-10,380 (10,330) and then 10,200. On the weekly Dow chart (second chart), there is a whole lot of resistance at about 10,650. The XMI (third chart) is also toying with a breakout failure; many more of those and the market could be headed for a sharp pullback. One worrisome sign today was that the VIX, the S&P 100 options volatility indicator, fell on a down day for the market, showing complacency here. The S&P 500 (fourth chart) turned back a day after clearing the 1150 level, while the S&P 100 (fifth chart) didn’t quite make it to significant resistance in the 590-600 area. Next strong support on the S&P is 1130-1140. The Nasdaq (sixth chart) is struggling at 1880 resistance, and 1850 is first support. Below 1850, 1805 and 1780-1793 are support, and a successful retest of the 1780-1793 area would be about the best-looking thing for the techs right here. The SOX, the semiconductor index, is right under a very critical trendline (seventh chart). A big move up tomorrow for the chips would look very impressive.

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Special report: For a free introduction to technical chart patterns, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.

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