Welcome To October
Just the manner with
which you would expect to launch an October.
Volume wasn’t overpowering.
It doesn’t have to be on a decline,
and indeed, should be, once you’re well into
a fall as we are presently.
Heavy volume at this point would be
the bitter medicine the market needs every now and then, and would have the
effect of upping the fear ante, washing weaker holders out of their positions.
I would caution, as I sometimes do
when a market descends to a widely-watched price level, about reading too much
into the market’s support levels and what happens when an index breaks a prior
low.
For example, the Nasdaq’s Aug. 3 low
of 3521 stands out like a sore thumb.
Often, an index will undercut a
widely-watched "support" point on heavy volume, only to shake out
everyone and their brother, in the process creating a durable bottom that
"everyone" thought wasn’t possible.
I am certainly not suggesting this
will happen at 3521, but merely pointing out that things are not so pat in the
market as they might sometimes appear.
A break of a prior Nasdaq low should
only tell you that the market is weaker now than it was at that previous point.
This is information of value,
particularly when combined with a comparison of volume at both lows.
But it is not something that tells us
we’re automatically going down to the next lower low, as some would have you
believe.
Going back in history, you will find
many bottoms that occurred shortly after a "major support level" was
breached.
Again, no reading between the lines
allowed.
Just keep your eyes and ears open.
Among the names Monday, Network
Appliance
(
NTAP |
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A second stock that I had mentioned as
being important to watch for leadership, Handspring
(
HAND |
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However, the fact that HAND came down
to a point just above its recent pivot is beside the point.
A leader such as HAND shouldn’t come
off 28% so soon in a budding advance.
The third stock that I’d suggested to
watch for leadership, i.e. subsurface market health, was Interwoven
(
IWOV |
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PowerRating).
IWOV also came to a rest just 4 points
above its pivot at par.
Yet, for a budding leader, IWOV’s 24%
decline off its top is not normal and gives you valuable information.
Another disappointment was Ariba
(
ARBA |
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which undercut two prior short-term pivots on huge trade.
Adding insult to injury were the bios,
which were scathed, though a few that had looked constructive, such as Human
Genome
(
HGSI |
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(
ALXN |
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PowerRating), remain comfortably within their
basing structures.
Just another reason why the aggressive
growth game is not a game that should be played by anyone other than day, swing,
or intermediate traders can be found in Broadvision
(
BVSN |
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Chart |
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PowerRating).
BVSN had the wind at its back, rising
from a split-adjusted 3 in 1999 to a high of 93 in the spring run-up.
Monday, BVSN lost 15% to go out at 21.
And yet growth at BVSN remains
scorching, with earnings expected to be up 129% this year and 50% in ’01.
So much for a pure fundamental
approach when it comes to aggressive growth stock investing.
And herein lies the umpteenth example
of why it pays to admit you’re wrong and cut your loss.
That is, when it’s still small.