An Important Question Answered

January 20, 2003
Dave Landry

On Friday, the Nasdaq gapped lower and after a brief bounce
continued lower in early trading. It then worked its way sideways to lower
throughout the rest of the day. This action has it closing poorly and below its
50-day moving average (a).

The S&P held up better on a relative basis.
However, it too is now trading below its 50-day moving average (a).

Friday seems to have answered my recent questions about
whether we were seeing bullish cup and handles within the sectors or bearish
double tops. Virtually all technology sectors, led by software/Microsoft, were hit
hard.

So what do we do? Even though it looks like it is breaking
down, I don’t think we should chase the market lower. There should be plenty of
opportunities (especially in technology) on the first bounce. For now, focus on
sectors such as oil service that can trade contra to the indices and have
already pulled back. For the aggressive, the gold stocks look like they may be
in the early phases of forming a top.Â

Looking to potential setups, Cooper Cameron
(
CAM |
Quote |
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PowerRating), in
the aforementioned oil services sector, look like it has the potential to
continue its rollover out of an inverted cup and handle.