Adjusting To Reality

  • March 4, 2002
  • Gary Kaltbaum

Three reversals…all
down. Low readings on the VIX and
VXN. The Nasdaq  looking like death. These
were all pretty darn good reasons for my continued worrisome stance. And yes, it
was working quite well…until Friday. Except  for volume — which is not
powerful at all, the leading part of the market  took another leg up — and
I am not going to ignore it.

The Dow
(
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has  been the leading major index, broke above the
10,300 level…a six month  high. The S&P
500  
(
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1125 but is still far  off from the Dow.
New Highs have gone over the 300 mark. I will talk
about the Nasdaq
(
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a minute.

I don’t think it is smart to fight such
moves…yes, you can be skeptical but reality is reality…so I adjust. I was
definitely leaning towards the NYSE-types to cave into the Nasdaq…but the
opposite happened. I had this baby perfect until Friday…but that’s OK…as
long as I adjust.

Now to the Nasdaq.  At about 1:00 p.m. 
ET on Friday , I urged my subscribers to start covering Tech shorts…not
because they are starting to look good but because Techs
can come on quickly…and a bunch of them did just that. The technical
condition of the Nasdaq and many Techs are still
horrid…but if the Dow and S&P 500 continue the dance to the upside…I expect
more upside testing for the Nasdaq.

One note: The Nasdaq still has not had a
follow-through as volume was lighter on Friday’s rally than Thursday’s drop. The
S&P 500 is second in the race of major indices. It still lags the Dow. Keep
your eye on 1177 which was the
Jan 7 high. A break above confirms the Dow’s move.

The last-place Nasdaq still has a lot of work
to do but worth watching is a couple of leaders in their respective groups.
KLA Tencor
(
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leader in the Semis. It broke a one-year high on
Friday. Volume was 1.5x average. Keep in mind, it is still way below two-year
highs.

Gilead Sciences

(
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Biotechs have been acting poorly. If these sectors
start to put together a few good weeks, odds favor these two cam lead. They had
held up best during the trashing.