Wash-And-Rinse

August 3, 2000
Kevin Marder

Why couldn’t
we
have gotten more of this 1.8 billion+ volume on
the Naz a month ago?

If you’re wondering how well the techs
can fare in the absence of a stout semi group, the recent past portrays a mixed
picture.

The experiences of ’95 and ’96 depict
a tech sector that, at best, tends to move sideways as the chips correct.

In ’98, however, the Naz
kept moving higher even though the chips stumbled. Later in the year, the Naz
finally rolled over, joining the semis.

The conclusion is that, despite the
worries of some, the Nasdaq market can move
without the help of the semis.

As always, however, we’ll let the
market tell us exactly when it’s apropos to wade back into the market.

As Greg Kuhn pointed out in his column
today, we intermediate players would need to see more than an O’Neil
follow-through day to rekindle our interest.

Seeing a follow-through session in the
Naz, for example, does us little good when the technical damage, i.e. overhead
supply, is substantial in nearly all of the growth sector.

And remember, a falling market doesn’t
go straight down.

There will be fits and starts along
the way, which is exactly why the first few days off a low should not be
trusted.

At about this time in a correction, I
like to calculate how well various prior leaders have held up.

It’s no secret that the stocks that
give back the least amount of ground in a correction tend to lead in the ensuing
advance.

In the bells and glamours, a number of
issues scored wash-and-rinse days (wide range with a close at or near the
session high, preferably on big volume), which tend to shake out so-called weak
holders.

This is constructive action after a
two-week downdraft.

So is the fact that a number of growth
stocks are bouncing off their 50-day average.

How a stock acts around its 50 (does
it knife right through or does it bounce off the line?) can give you a hint as
to its near-term performance.

Elsewhere, Sapient
(
SAPE |
Quote |
Chart |
News |
PowerRating) is one
to watch. It’s up about 38% in two days as it nears its 52-week high. Volume has
been major.

Wash-And-Rinse

BUY THE FEAR, SELL THE GREED

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