To Turn Things Around, Two Primary Things Must Happen

  • February 24, 2004
  • Tim Truebenbach

There
has been no secret behind the direction of this market over
the last month: it has been going down and taking growth stocks with it.

image src=”https://tradingmarkets.com/media/2004/Tim/tt022404-01.gif” />

image src=”https://tradingmarkets.com/media/2004/Tim/tt022404-02.gif” />

Up until about the last
week of January, the market was chugging along with the Nasdaq firmly in the
lead. On 1/27, we caught our first blatant distribution day, or solid evidence
of professional selling. This pattern has continued and has put most growth
stocks in a poor position to rally. Yahoo!

(
YHOO |
Quote |
Chart |
News |
PowerRating) for example, took another move even lower beneath its 50-day moving
average today.

image src=”https://tradingmarkets.com/media/2004/Tim/tt022404-03.gif” />

Netflix

(
NFLX |
Quote |
Chart |
News |
PowerRating) also made such a move on massive volume as the company
forecasted a larger-than-expected first-quarter loss.

image src=”https://tradingmarkets.com/media/2004/Tim/tt022404-04.gif” />

^next^

It would be great to see
the market and growth stocks regain their footing, but there is a long way to
go to do so. We’re not as bad off as a Bear Market, but I am not impressed
at all with the action of stocks and the major averages.

In order to turn things
around, two primary things need to happen:

1. We need to start seeing
accumulation in the overall indexes. They need to rally on above-average volume
in a meaningful way.

2. Growth stocks need to
take the reins from the cyclical giants that have been acting the best. Stocks
like Wal-Mart
(
WMT |
Quote |
Chart |
News |
PowerRating) and indices
like the Dow are not your historical leaders for a prolonged Bull Run. It is
usually better to just get out and patiently await something better.

image src=”https://tradingmarkets.com/media/2004/Tim/tt022404-05.gif” />

Qualcomm

(
QCOM |
Quote |
Chart |
News |
PowerRating) pre-announced good numbers and saw a nice move, which it has held.
This isn’t exactly the stock I would be looking for to talk about, but
it is better than most of the other options right now.

image src=”https://tradingmarkets.com/media/2004/Tim/tt022404-06.gif” />

With most stocks being taken
apart in the growth arena, it is best to avoid new purchases and keep very tight
stops to control any downside in a portfolio. Patience for an easier market
may be the best recipe until we start seeing some positive factors positively
influence the market.

Tim Truebenbach

timt@tradingmarkets.com