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SNAPBACK RALLY

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By Harry Boxer, The Technical Trader (www.thetechtrader.com)
The market got the snapback rally I’d been anticipating after four days of declines, but it wasn’t easy. The session started out with a slight move up and then fell sharply again in the morning. The decline took out the intraday double-bottom created yesterday on the Nasdaq 100 and reached down to the 1244 area before reversing.

One of the keys at that point was that the Dow and S&P 500 did not make lower lows, signaling a positive divergence. Sure enough the market rallied and did so for the rest of the day, a nice three-step rally that continued until the last 30-35 minutes or so when late profit taking pulled them back a little.

Net on the day the Dow was up 137, a strong comeback. The S&P 500 was up 11 ½, the Nasdaq Composite up 10 ½, and the Nasdaq 100 up less than 4. So you can see that Nasdaq had a tough time today with the SOX Index barely ahead at all.

The technicals reflected that, as they were more positive on New York than on Nasdaq. NYSE advance-declines were 21 1/2 to 10 ½, and up/down volume was 4 to 1, with about 1 1/3 billion traded, fairly light volume but not bad for a Friday summer session. Nasdaq traded about 1.6 billion, with about 1 billion of it to the upside and less than 600 million to the downside. Advance-declines were about 3 to 2 positive on Nasdaq.

It was a mixed picture today on my personal board. Most of the stocks were up today, led once again by the Asian Internet stocks. Chinadotcom (CHINA) soared 2.15 on talks with AOL (AOL). AsiaInfo (ASIA) was up 1.06. FindWhat.com (FWHT) was up 1.46. Those were some of the leaders in the Internet sector. Of the tech stocks I follow closely there were scattered fractional gains across the board, with QLogic (QLGC) up ¾, OmniVision (OVTI) up 33 cents and Emulex (ELX) up 48 cents.

In the low-priced sector, Evolving Systems (EVOL) was up 45 cents, Exult (EXLT) up 36 cents, and ATI Technologies (ATYT) up 63 cents.

Stepping back and reviewing the overall patterns, the indices had come down and tested important and key support -- actually took them out slightly --before rallying today and snapped back towards resistance. I’ll be watching the 1280 overhead resistance on the Nasdaq 100 on Monday, as well as the 996-1000 zone on the S&P 500 to see whether the market can get back up through those resistance levels and re-establish the up-trend, or whether the four down days we had Mon-Thurs were a serious enough thrust to the downside with today merely a snapback technical reaction.

So the first part of next week is probably going to be key to determining the near-term direction of the market.

Good trading!

Harry