Beyond The Valley Of The Bells
About the only
positive in Friday’s
downdraft was volume, the third-heaviest ever in the Nasdaq, and indicative of
1) increased concern, and 2) some major buying in the p.m. session.
Interestingly, the Naz’s poor showing
notwithstanding, the market’s growth leaders were evenly split.
Although Microsoft
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Friday’s headlines, from a medium-term standpoint it was EMC
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more important.
The reason is that, in the eyes of the
market, MSFT has been damaged goods for months, dropping as much as 59% from its
high.
EMC, on the other hand, had fallen up
to 34%…not a small drop, but a smaller drop than any other benchmark.
This, then, was as important a stock
as any to watch to determine when institutions may return to tech.
The distribution in EMC over the past
couple of days was excessive for a stock that would be expected to play a
leadership role if the Nasdaq’s 20%, Nov. 30-Dec. 11 advance was the beginning
of a sustainable intermediate trend.
Beyond the valley of the bells,
however, the speculative growth stocks that had established themselves as recent
leaders continued their breakdowns, confirming the tone of the Index.
For example, Aeroflex’s
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pattern turned sloppier.
California Pizza Kitchen
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broke down from the seven-week base it was in.
Emulex
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Tuesday, lost close to 30% over the last three days.
Intranet
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example of a leader gone astray…a week ago it broke out of a nine-month base
on good volume before Wednesday’s obvious failure and Friday’s renewed selling.
Netiq
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of a five-week, v-shaped base Tuesday, completely fell apart.
Peoplesoft’s
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also excessive for a leader.
What began as an encouraging week,
ended with two more days of Nasdaq distribution and breakdowns in the leaders,
with intermediate-term traders facing the prospect of more basebuilding, more
backing-and-filling, and more patience.