Sell The Rumor, Sell The News

This column was
posted at 3:05 p.m. ET

It is not
often
that you see a stock like Cisco
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subtract 15% in one
day, and on 250 million+ shares.

What does this mean for the position
trader?

Not much.

The reason is that the setups aren’t
there in the growth sector to begin with.

So you are necessarily in a heavy cash
position.

Within Wednesday’s list, IBM
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and Tellabs
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, the top performing bells, resisted arrest.

Bed Bath Beyond
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is in a
five-day triangle, inches from record turf after emerging from Wednesday intact.

Biovail
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sets up.

Canadian Pacific
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continued its
follow-through from last week’s breakout…incidentally, if you have young
children, and wish to whet their appetite for investing, there is no better way
to do it than to buy them a few shares of a stock. My father bought me 10 shares
of Canadian Pacific when I was 12. And look what happened to me.

Cerner
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idled on dimming
volume as it etches a three-month base.

Expeditors International
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sets up.

As does Lockheed
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.

Remember to set your sights lower when
you’re dealing with an aerospace or financial or energy stock or any stock
lacking strong earnings growth…the patterns may be the same, but the
fundamentals aren’t.

Which is why these names are much
better suited for the swing trader who is after a few points than the medium-termer
looking for real meat.

Garmin
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, a recent IPO, was
little affected by the red tide…what with its fast revenue and earnings
growth, this is the type of “unknown” that frequently will come out of
nowhere to help lead a new bull market.

Ditto for I-Many
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, which
also pulled back bullishly on light trade.

There are a few others like these,
smaller in size, which dovetail with the relative strength seen in the R2K.

For stocks like these to go public and
then speed higher amid a depressed backdrop for growth says something that no
analyst can.


Following is a
reprint of Tuesday’s column, which was posted much later than usual:

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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, Tellabs
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,
Oracle
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, etc.

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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, 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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,
Brocade
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.

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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and Cabot Micro
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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.