Boo!
Where’s all of that demand that was
supposed to come in from the “A” team returning from their vacations?
What, didn’t anyone figure that maybe,
just maybe, the “A” team would return, see their stocks higher and
decide to cash in?
A classic case of hope on the Street, I
guess.
Only the market really knows for sure.
Although we tend to give “the market” human characteristics, as if
there’s some mad scientist behind its controls like in the Wizard of Oz, it
really has no feelings. It has no expectations. It doesn’t understand the
concepts of fear, hope and greed. It just does its thing. As traders, it’s our
job to assess what it’s telling us, which has no basis in what we feel or
expect.
So, what’s the assessment?
Just when things appeared to be
shaping up, the Naz is back in the soup again — a week’s worth of gains wiped out
in two days. Then again, for the aggressive-growth intermediate-term trader,
there hasn’t been very much to sink one’s teeth into. Some stocks with leading
characteristics have been setting up, but at this point, need to pretty much
hold Wednesday’s losses to remain in tight patterns. Names like BEA Systems
(
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PowerRating),
Mercury Interactive
(
MERQ |
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PowerRating), Network Appliance
(
NTAP |
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PowerRating), and Siebel
Systems
(
SEBL |
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PowerRating) fit this bill — all mentioned in previous columns.
And while these stocks wait to either
break out or break down, stocks like Juniper Networks
(
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PowerRating) and Applied
Micro Circuits
(
AMCC |
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PowerRating) broke out from sloppy basing patterns recently — both
on less-than-sufficient volume. Broadcom
(
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PowerRating) and Brocade Communications
(
BRCD |
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PowerRating) attempted to break out from basing patterns recently on below-average
volume and have succumbed to weakness — both falling back into their bases.
Checkpoint Software
(
CHKP |
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PowerRating) also broke out recently from its basing pattern
on below-average volume. I always pass when I see this.
PMC Sierra
(
PMCS |
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PowerRating) was another
that spent the past month “wedging” its way back toward old highs on
below-average volume. Not that this should have been a major concern. A
low-volume tight-handle setup from here, followed by a big-volume breakout to
new highs would truly identify its real mettle. It’s just that Wednesday’s
downside move on the biggest volume day in over a month isn’t a good start.
Again, considering volume was really lacking into the completion of the base.
If this is how the aggressive-growth
leaders act, what’s it really telling us about the current market environment?
Not all is dead, however. A two-day
decline in the Naz may be just what it needs to get kick-started again to the
upside. It held right on its 200-day moving average Wednesday. We’ll just have
to keep watching and assess conditions day-to-day like we should.
Speaking of which, my last column
was more upbeat and filled with some promise. Of course, my tone now is one
of question. As an intermediate-term trader in the trenches, this is how you have
to think — at least until something more meaningful and definite develops in the
market.
I haven’t been doing much of anything
over the past six weeks other than looking in closely and listening to the
market. The stocks I’ve been focusing on — most of which have been mentioned in
this column — I watch right up until their breakout point. Unfortunately, so
far, most of have had questionable setups right into the breakout. Either the
patterns were too upward “wedging,” as in the case of Pericom
Semiconductor
(
PSEM |
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PowerRating); their cup formations were too deep
to seriously consider for immediate purchase, as in the case of Ariba
(
ARBA |
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PowerRating); or volume just wasn’t up to
snuff, as in the case of Broadcom.
Moreover, many of
the stocks in the market’s current leading groups have lacked proper earnings
and revenue growth. This has been fine historically for biotechs and more
recently for Internet stocks, but not for a medical-related company that’s been
in business for years.
The jury is now in serious
deliberations about the Naz’s near-term resolution. Meanwhile, that big ‘ole
base-building saga that began in April continues to unfold.
Outside of all of this, Patterson
Energy
(
PTEN |
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PowerRating) did break out from its basing pattern Wednesday — from a
nice tight handle. But, again, where’s the volume? Volume came in only 12%
above the stock’s 50-day average. It bears watching, however. On rare occasions,
volume will confirm the breakout by rising at least 40% above average on the
second day of the breakout.
