Some Facts To Consider

February 12, 2003
Dave Landry

On Wednesday, the Nasdaq opened soft
but soon chopped its
way higher. However, it quickly found its high and generally sold off the
remainder of the day. This action has it closing
at new multi-month lows.
The October lows remain a potential target.

The S&P put in a similar performance. It too
closed at
multi-month lows. The October lows remain a potential target here too.

Once again the selling remains broad based. Utilities and
HMOs were hit especially hard. Banks, broker/dealer and insurance were hit
fairly hard too. And yet again, previously strong sectors such as the generic
drugs finished lower and now appear to be rolling over. Further, bear market
“safe havens” such as drugs and consumer non-durables continue to
slide.

So what do we do? Based on the
above, we obviously remain in a downtrend. However, before you run out and
establish new short positions, consider the fact that we are now getting fairly oversold based on average
advance/decline readings and price itself. Further, in case you’ve been under
a rock, we remain in an event-driven environment. Therefore, manage what you
already have (and look to take profits/tighten stops should we continue to
slide) and keep any new positions on the light side.

Looking to potential setups, my new “dead
horse,” Fifth Third Bancorp
(
FITB |
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PowerRating), in the weak banks (and let’s face
it, who would put their money in a weak bank?),
still looks
like it has the potential to resume its downtrend out of a pullback.