A New Ray

August 28, 2000
Kevin Marder

Just when the
intermediate-term trader thought things would never improve in the
growth complex, a new ray of light has quietly fought its way through the clouds
that obscured tech in this, the summer of 2000.

Specifically, there are two things
that made themselves evident last week.

First, the Naz showed three
accumulation days in a row (Tuesday, Wednesday, and Thursday) for the second
straight week.

As well, Nasdaq volume, though nothing
to write home about, was nevertheless greater on Tuesday, Aug. 22 than on the
prior Tuesday (Aug.15), greater on Wednesday, Aug. 23 than on the prior
Wednesday (Aug. 16), and greater on Thursday, Aug. 24 than on the prior Thursday
(Aug. 17).

Second, there has been better tone
among not only a gaggle of glamours, but also a distinct, yet subtle,
improvement in the numerous secondary issues that aren’t on the radar screen of
many traders.

For various reasons including a
premature base, an extended chart, a lack of fast earnings growth, etc., these
are generally not names that excite me.

However, their improvement, and the
improvement of others like them, says something about overall market health.

As for Monday, the volume was once
again "as light as late August."

If you’re an intermediate-term trader,
I wouldn’t pooh-pooh the
importance of volume.

Numerous traders of all time frames
have seen their accounts idle or lose ground since the May 30 O’Neil
follow-through day in the Nasdaq. (Incidentally, the May 30 FTD is still in
effect, and will continue to be in effect until the May 24 low is taken out.)

The reason that many trading accounts
have dwindled since the May 24 low is that the momentum game hasn’t worked.

For the momentum game to work, you
need volume to thrust stocks through pivot points and into follow-through mode.

Remember, follow-through is the third
element of the base/breakout/follow-through progression that is at the heart of
most successful swing and intermediate-term strategies, not to mention some
daytrading strategies.

Last week I moved off my 100% cash
position and waded back into the market.

Emphasis on "waded."

As I’ve said for some time now,
volume, the fuel for any durable advance, is what this market needs more than
anything else.

Therefore, the onus is still on the
bulls to prove that this rise is for real.

Nevertheless, the action of the past
week leads me to look at the glass as half-full.

A New Ray

BUY THE FEAR, SELL THE GREED

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