A Line In The Sand?

At the risk
of sounding like a broken record
, another week has passed and our
outlook has not changed. The Nasdaq continues to be in a brutal bear market. What’s amazing about last week was that even though the Nasdaq was
basically flat, more and more stocks continued to blow up. To make matters
worse, we believe the biotech sector
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has
finally topped ou
t.


Just remember, one of the symptoms of a bear market is eventually they get them
all. Any way you cut it, this is one of the toughest environments on record for
growth-stock investors. About the only thing the Nasdaq has going for it is that
it is trying to put a line in the sand at these levels. That said, this is the
“Goal Line Stand” for the Nasdaq. If it breaks below the 3000 level
and stays down, then all that support will become significant resistance. So
continue to be as cautious as possible as, day by day, more growth names are
blowing up. There will continue to be bounces, especially with seasonal holiday
strength coming up, but we are starting to notice that each and every bounce is
lasting a shorter period of time and the moves are becoming more and more
anemic.        

As far as setups are
concerned … what’s a setup? Hours of charting gave no sign of any growth-stock
breakouts and on top of that, we cannot even find ones with any decent potential
at this moment. Sectors that are not very exciting but continue to have solid
technical patterns are beverages (alcoholic, e.g., Adolph Coors
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), foods, health care (drugs, HMOs,
Hospitals, Nursing Homes), homebuilders, insurance, restaurants and utilities.

I know we are doing a lot
of tough talk right now. We just call ’em as we see ’em. In the spirit of this
holiday week, I wanted to end on a better note. I guess most of you know that
Babe Ruth was known for his home runs. Did you also know he struck out more than
anyone else? It’s a known fact that every time he struck out, he would  walk
back to the dugout with a little smile on his face. That’s because he knew every
strikeout was just getting him closer to the next home run.

I bring this up because
we all know how rough the past few months have been. This week marks the 38th
week since the top in the Nasdaq. I think it is important to remember that every
day that goes by during the tough times just gets us closer to when the market
decides to turn back to bullish form. Drops like this do not occur often. This
will provide a tremendous opportunity when the market is ready. This is the key.
Wait until the market is ready. I have no clue when that is or what point it
will be. The only thing I do know as a technician is that each new bull
market has the same identifiable marks as the previous one. Just as you can’t
hide all the institutional selling going on right now, you can’t hide
institutional buying. So while you may be a little down right now, just put a
little smile on your face because eventually the home runs will come again. Just
have patience.  

I wish you all a Happy
Thanksgiving!