Sectors Worth Playing

February 20, 2003
Dave Landry

On Thursday, the Nasdaq opened firmer but soon began to
sell off. It found its low by late morning and then chopped back and forth for
the rest of the day.

The bottom of
its recent pullback, circa 1260, remains a possible target here.

The S&P opened firmer too but generally worked its way
lower throughout the day. This action has it closing poorly and suggests that it
is resuming its downtrend out of a pullback from lows.

The bottom of its
pullback, around 805, remains a potential target here too.

So what do we do? Nothing much has changed. As
mentioned above, the indices (especially the S&P) appear to be resuming
their downtrends out of pullbacks from lows. Further, many sectors also appear
to be either doing the same or look like they have the potential to to do the same. These include
(but not limited to) defense, retail, broker/dealer (and other financial), utilities, transports, banks and
telecom. Therefore, continue to focus on the short side.

Looking to potential setups, Alliance Capital Management
(
AC |
Quote |
Chart |
News |
PowerRating),
in the weak financial services-asset management sector (a), looks like it has
the potential to resume its strong downtrend out of a pullback.

Merril Lynch
(
MER |
Quote |
Chart |
News |
PowerRating), mentioned Wednesday night and in the weak
national brokerage sector (a), looks like it has the potential to resume its downtrend out of a
pullback.

Hey Dave, How About Them Semis?

Yes, the semis have been doing well. They have had a nice
bounce from lows, have broke out of their trading range and their moving
averages could “bow tie” soon.

However, I don’t think that in and of themselves they can buoy
the market. This may have been true back in the good ole days, but not in more
recent times. This is especially true when you consider all of the sectors that
remain in serious downtrends (e.g., those mentioned above).