More Oversold

April 24, 2002
Dave Landry

On Wednesday, the Nasdaq lapped higher on the open and
chopped around. Then, early in the afternoon, it began to weaken. The selling
lasted throughout the rest of the day. This action has it closing poorly and
approaching its February lows.

The S&P also sold to close poorly.

So what do we do? Nothing much has changed. Oversold became
even more oversold — again. This action is keeping me in the bounce camp. This is
not because I have any buy signals, it’s simply because I think it’s too late in
the current cycle to initiate new shorts. Therefore, as mentioned on Tuesday
night, look to nibble on the
long side but stick with issues that can trade contra to the major indices (e.g., defense) or those issues that have held up well as of late (e.g., healthcare, banks, insurance).

There were very few meaningful setups tonight (Wednesday).
Normally this is a sign that the markets should be avoided.

Looking to potential setups, Tenet Healthcare
(
THC |
Quote |
Chart |
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PowerRating), in
the strong healthcare — hospitals group, looks like it has the potential to
resume its strong uptrend out of a Trend Knockout.