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A promising rally faded in the last hour on Friday, as an earnings warning from Oracle was too much for buyers to overcome.

The ISDEX http://www.wsrn.com/apps/ISDEX/ lost 12 to 265, and the Nasdaq fell 65 to 2117. The S&P 500 declined 7 to 1234, while the Dow added 16 to 10,466. Volume rose to 1.29 billion shares on the NYSE, and 2.35 billion on the Nasdaq. Breadth was positive: advancers led 19 to 11 on the NYSE, and 18 to 17 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.

The Michigan consumer sentiment survey showed a slight uptick, the second straight day that economic indicators revealed a slight improvement.

Oracle fell 4 1/2 to 16 7/8 after warning that earnings will come in 2 cents light of estimates at 10 cents a share. The company said orders were just being postponed due to the economy. A host of software stocks were hit by analyst downgrades on the news, among them Vignette, off 7/16 to 5 15/16, Siebel, down 8 1/2 to 36 1/8, i2, off 3 9/16 to 24, Commerce One, down 2 1/2 to 15 9/16, Ariba, off 2 1/2 to 14 1/2, Art Technology, down 4 3/16 to 24 1/8, and E.piphany, off 2 1/4 to 14 7/16.

Cisco was a weak sign for the Nasdaq, falling 2 3/8 to a new low of 22 1/8. Assuming the company can meet estimates for the next two quarters, it is trading at its lowest valuation since October 1998. Competitor Juniper Networks plunged 8 5/16 to 53 1/2 on rumors of an impending downgrade.

Ameritrade rose 11/16 to 8 15/16 on reports a top Merrill Lynch official may become the company's CEO.

Sapient fell 1 13/16 to 11 3/16 on an earnings warning.

Yahoo lost 2 3/4 to 21 11/16 on earnings concerns. Yahoo also adopted a shareholder right plan to fight hostile takeovers, but said there have been no efforts to take over the company. Salomon Smith Barney speculated that Yahoo could merge with eBay, which slipped 1/2 to 37.

Broadcom fell 2 to 46 on more lowered earnings estimates from analysts.

eBenX slipped 3/4 to 5 on news that its relationship with Verizon will end at the end of the year. eBenX said its financial outlook will not be affected.

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 indexes had a very nice turnaround going after forming higher lows at very critical supports, but then they gave back much of those gains. As we've been saying, 10,292 on the Dow, 1215 on the S&P and 2070 on the Nasdaq are make-or-break levels for the market. They will either be a bottom of some significance, or they will mark the beginning of a broader bear market. Two big negatives today: the S&P and the Nasdaq set new closing lows. But there were a number of positives, too: Breadth was positive, and the semiconductors, cyclicals and Transports all posted nice gains to the upside, all signs of early buying pressure. This is the third time in a week that the indexes have tried to reverse, a clear sign of support, but so far buyers have failed to come in at higher levels. The Dow must close above 10,650, the S&P above 1275, and the Nasdaq above 2320 for any sort of a bottom to be considered in place.

The Nasdaq may be trying to reform its 1990 logarithmic trendline at 2070 (first chart), a big plus. That line again provided strong support today, but the index has been headed straight down since breaking its true 1990 trendline at 2388 10 days ago, and it set a new closing low today. Can it reverse? We need to see a close above 2320 to call even a minor bottom here. The 2028 level was also the July 1998 peak (second chart); old tops make good bottoms, and that was a major peak for the Nasdaq. To the upside, 2250-2300 is first resistance. Note the downtrend lines from September in the third chart; they indicate potential resistance at 2250 and 2350.

The S&P 500 once again held critical support at its recent bottom of 1215, but it too set a new closing low. To the upside, 1245-1254 is first resistance, and above that the index must get back above 1275, the early January low and the September downtrend line (all levels in the first chart below). It is also interesting to note that the S&P 500 came within 2% of 1190, its July 1998 peak (second chart), lining up nicely with the Nasdaq.

The Dow once again held 10,300 support; a close below 10,292 could lead to a retest of the index's lows in the 9600-9700 area, although 10,200 or so could also provide support. To the upside, the Dow must get back above 10,650 on a closing basis to have a positive bias. The Dow Transports are back above 2900, a good sign. To the upside, the Transports must get back above 3000.

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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