In Or Out Of Range?

November 4, 2002
Dave Landry

On Monday, the Nasdaq gapped higher and continued higher
throughout the morning. Then, early in the afternoon, it began to drift and work
its way lower. This selling accelerated going into the close and has it closing
poorly.

The S&P also reversed to close poorly after trading nicely
higher.

So what do we do? The fact the market broke out of its
trading range is a positive. It’s the first sign in almost three weeks that this
market may have the potential to make another leg higher. However, the
intraday reversal is somewhat concerning. It suggests that the market,
especially the S&P, could return to its trading range. I’m not going to
complain too much though. A 2.5%+ gain in the Nasdaq is nothing to sneeze at.
Therefore, considering the above mixed signals, I think both sides can be played while this
situation resolves itself.

Looking to potential setups, Espeed
(
ESPD |
Quote |
Chart |
News |
PowerRating), in the
strong Internet sector (been a long time since I’ve said that), looks like it is
becoming a low volatility momentum situation. Said alternatively, it looks
poised to break out of a narrow range sideways consolidation.

Mid Atlantic Medical*
(
MME |
Quote |
Chart |
News |
PowerRating) in the weak HMOs (see
recent commentaries), gapped higher on the open but reversed to close poorly and
in the minus column. This action suggests that it is poised to continue its
meltdown out of a Pullback/First Thrust.