Nasdaq 5,000, More Than Just A Dream
At this point, you almost have to figure traders will want to make a run at the next milestone. And who can blame them? This tech-driven market continues to trek higher despite the Dow's lackluster performance. It is possible that today's weak performance in the Dow is just more evidence that investors are leaving on any rally to head for technology issues. The Nasdaq has been filled with opportunities and the outlook is still bright. Today was another example of how playable the Nasdaq is too, with an open near 4750 and three intraday bounces off that support mark. You could have stepped into entry points at any one of those dips. This is really becoming a broken record with the Nasdaq dipping to support only to rise once again. The question now is, do we have enough juice to propel the Nasdaq to 5K this week? Today's close at 4784.32, +87.68 leaves us just under 5% away.
The Dow Industrials is another, less enthusiastic, story. It is trying to break a month and a half downtrend. Today saw a tight range between 10084 and 10186 We closed the session near the middle at 10136.38, +8.07. The key here is for the Dow to close solidly over the 10-dma, currently at 10,206. This has been the resistance since mid-January that traders have been selling on. The old bear trap scenario. Just when you think it has the momentum to punch above that moving average, SNAP, it's got you. I'm still not real keen on this index until we see one or two day's closing over this mark. Some are acting as if this will never happen with the "new economy" taking over. In fact, it will eventually free itself from this rut, but there is no point testing the waters on some of these between down issues until it does. Especially when you can find all the hot stocks you want in the SOX, Russell 2000 or the previously mentioned Nasdaq.
Speaking of the SOX, even after a more than one hundred point move on Tuesday, it still managed to gain another 1.72. This sector continues to leave the general market in the dust. The other hot sectors of the day included Biotech, Internet, Networking and Hardware. Even the Online Brokers put together their third straight advance on positive comments about how much trading we are all doing. Some analysts are looking for 30-40% from last quarter in trading activity.
The market internals were also good. Volume was strong at over 2.2 billion shares on the Nasdaq and over 1.27 billion on the NYSE. The advance/decline line was even on the NYSE, while Gainers beat advancers 24 to 19 on the Nasdaq. The 30-year bond fell slightly to yield 6.16 by the close.
The newswires were abuzz with big news from the telecoms today. SBC Communications (SBC) and BellSouth (BLS) are in talks to merge their cell phone properties in an attempt to create a near-national wireless provider. The talks are still in the preliminary stages, but if it comes to fruition, the new business would be able to compete head-to-head with AT&T (T). Investors voted on the possible deal with their wallets, bidding up shares of SBC (+3.94, 41.69) and BLS (+2.44, 43.00), while shaving $1.50 from T's already depressed share price.
Also in the news today, Lucent announced plans to spin off three of it's slower growing businesses including data, cabling, and call-accounting to form one company, which is expected to be available to shareholders in September. Lucent is taking this action in order to narrow the focus to the communications networking portion of it's business. This announcement seemed to help alleviate some investor concern regarding Lucent's rather slow growth rate. LU's communications networking business accounted for roughly $30 billion of Lucent's $38.3 billion of sales last year. Wall Street greeted the announcement with enthusiasm as nearly 75 million shares were traded in comparison to the average 18. Lucent closed the session up $9.13 at $68.63.
And we are not done with the telecoms just yet. Shares of Qwest Communications (Q) were up $11.38 on the news of a possible buyout by Germany's Deutsche Telekom. Qwest spokesman Matt Barkett, claimed that the reports were nothing but rumors and speculation. Deutsche Telekom offered no comment.
Enthusiasm continues for 3COM's (COMS) spin-off of its Palm unit. With most of the 23 million shares of the new company (PALM) going to institutions, investors have been bidding up the price of COMS, in an attempt to capture profits when the rest of the PALM offering is spun off to COMS shareholders later this year. The PALM IPO is expected to price tomorrow at $38 per share, which has been raised from the original $14 proposed offering price. COMS traded up to another new 52-week high of $119.75 in today's session.
Among the winners (sort of) on the NYSE was AETNA (AET). The insurance company has been beaten up lately, and today trading was halted more than once due to trade imbalances. The news was finally confirmed after the close that AET had received a $10 billion takeover offer from Wellpoint Health Networks and Dutch investment bank, ING Group. AET has yet to respond to the $70/share cash and stock offer, which was received on February 24th, the day before the company ousted its CEO, Richard Huber. AET investors liked the idea, boosting the stock $12.69 to close at $53.81.
The future of this market still sounds like a broken record. The Nasdaq is where the action is at for those looking to be long the market. The Dow has provided as much volatility of late, but the trend is still lower, although may be coming to an end. A nice retest of last week's lows followed by a bounce which can close above the 10-dma might be just what the Dow needs. Hopefully it can curb this downtrend without another panic event to the downside. But if it does cause investors to sell and pull down the other markets like the Nasdaq, I will be hunting for entry points. Earnings season just isn't that far off anymore. Dips in the Biotech, Semis, and the old reliable Internets (still sounds strange) is where I will be focusing my efforts.