Bounce

June 14, 2002
Dave Landry

On Friday, the Nasdaq gapped lower and initially sold off.
However, it quickly reversed from the news driven “pop down” opening
and began to rally nicely. Then after some mid-day consolidation, it resumed its
rally.Â

The S&P also closed well after tailing lower.

So what do we do? There are multiple reasons to believe
that we are in bounce mode. First, price itself: The fact that we reversed in
the face of negative news (and after hitting new lows for the year). Second, the
market is extremely oversold at these levels. And finally, there are some buy
signals that are beginning to trigger (namely in the VIX).Â Technology,
being the most oversold, will likely stand to benefit the most from this bounce.
However, I don’t think you should blindly go out and bottom fish in individually
issues. If you are looking to play here, you’re probably better off nibbling at
the Q’s. However, just make sure you have a chair ready for when the music stops
because, as you’ll notice above, the big blue arrows are still pointing down.

Oxford Heath Care
(
OHP |
Quote |
Chart |
News |
PowerRating), in the strong
healthcare-health care plans, is in its first pullback since breaking out of a
high level loosely-formed base. This action suggests it has the potential to
resume its longer-term uptrend.