Soggy, But Stout

Despite the Naz's sogginess Tuesday, there was a paucity of distribution.

Certainly not in the Index itself.

And certainly not in the leaders, which by my count showed just one in six names being distributed.

We will need to see more than this to mar the otherwise-constructive action in certain growth vehicles.

In the bells, the day's feature was the 9% markdown in EMC (EMC | Quote | Chart | News | PowerRating), which remains important to watch from a sentiment standpoint...its action was not unrealistic given its choppy basing structure, but disappointing nonetheless.

The constructive action in Cisco (CSCO | Quote | Chart | News | PowerRating), Oracle (ORCL | Quote | Chart | News | PowerRating), Nokia (NOK | Quote | Chart | News | PowerRating), and Glue (GLW | Quote | Chart | News | PowerRating), pulling back on drying volume, perhaps made up for what happened in EMC.

Among the names, the very volatile Aeroflex (ARXX | Quote | Chart | News | PowerRating) pushed to the top of its seven-week base.

Intranet (INRS | Quote | Chart | News | PowerRating) is a stock that somehow reminds me of some of the spring '00 outperformers such as SDLI (SDLI | Quote | Chart | News | PowerRating); stocks that came straight out of a saucer without any sort of handle...hopefully, you learned something from the behavior of these last spring and can apply these lessons to your future trading.

Powerwave (PWAV | Quote | Chart | News | PowerRating) began building a handle to go with its seven-month cup.

Qualcomm (QCOM | Quote | Chart | News | PowerRating) stepped back to the top of its prior range.

Meanwhile, focusing only on the solid accumulation days of Dec. 5, 8, and 11 misses half the picture.

The other half is the beneath-the-surface supply/demand quotients of the individual leaders.

To better assess the market's subsurface condition, you should be asking yourself how many bases are forming in the growth sector, and in what types of companies.

Obviously, the more you see, the better you should feel about the general market and your chances of successful medium-term stalking.

Some intermediate advances boast hundreds of basebuilders.

Other intermediate advances contain scores of basebuilders.

I would place the February-to-mid-March advance of '00 in the latter camp.

That ascent did not have as much participation as the '97 run, yet was loaded with potential for the opportune player willing to act decisively upon what he or she saw.

Here is a suggestion on how best to wade back into the market, whether it's two weeks from now or two years from now.

One idea is to put 20% of your account in growth names as they emerge from solid bases on robust volume.

If you risk 6% on each position, and, at worst, all of your positions fail, you've risked just 1.2% of your account.

The reward, of course, is getting well-positioned in what you believe to be the leaders of a new, intermediate-term advance.

Of course you should insist on the initial 20% position(s) proving itself to you before you wade deeper into the water.

But perhaps you did just this on several occasions since the March 10 top...and on each occasion you were stopped out of every position for a loss.

Well, judging from numerous conversations I've had at conferences and the like, including TradingMarkets2000, most traders jumped right back in with far more than 20% of their accounts, bought stocks well before bases were completed, failed to insist on powerful volume confirming breakouts, etcetera...to make matters worse, there was no stop-loss plan.

If this happened to you, note that every successful trader I know went through some sort of learning process similar to this in his early years...these people absorbed their share of mistakes, took what they learned and took themselves to the next level.