No Feasting Allowed
Monday, I spoke of the lack of
constructive basing activity in the tech benchmarks.
This is important because durable
advances in the growth sector need institutional sponsorship.
And the Big Boys, by virtue of their
size, need big fish to feed on, names that they can get in and out of with
relative ease.
Names like EMC
(
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(
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Oracle
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Since it can be dangerous to hang your
hat on any one indicator, I would not say that strong basing-and-breakout action
in the bells is an absolute necessity for a durable medium-term advance.
It could be that big tech sits the
next advance out while small- and mid-cappers take control of the reins.
Anything is possible.
But the odds that a move is for real
are elevated when the bells sound.
And the market doesn’t yet have this.
Neither does it have a living,
breathing, glamour component.
Either the glams are still in
intermediate downtrends — such as Verisign
(
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PowerRating), Siebel
(
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Ariba {ARBA|ARBA] — or the bases that are being built are sloppy.
For the latter, see Aeroflex
(
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PowerRating),
Brocade
(
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PowerRating).
At the same time, you have a Naz
that’s locked in a downtrend.
These objective observations about the
bells, glamours, and Index of Growth (no opinions, thanks) are all the
long-side-only medium-term specialist needs to know to keep his or her powder
dry.
Granted, there are occasional
breakouts in names such as International Game
(
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(
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the latter defying a two-day, 26% drop in its handle to become the leader du
jour.
But these are occasional; not the
rule.
And even these have yet to prove
themselves.
When they become the rule — and when
there are scores of them proving themselves, as in January ’91, August ’93,
January ’94, January ’95, January ’96 — is when the odds heavily favor
aggressive participation by the intermediate-term trader.
If you must nibble, nibble.
But no feasting until the meal begins.
You don’t want to spoil your appetite.