Traders Take Profits

March 6, 2002

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.