Morons Vs. Geniuses

March 8, 2002
Dave Landry

On Friday, the Nasdaq lapped higher and rallied early.
It then chopped sideways for most of the day before selling off back to the area
of its open. Finally, it strengthened going into the close. This action has it
closing well and puts it above its 50 and 200-day moving averages.

The S&P wasn’t quite as strong but did manage to close
in the plus column and also closed above its major moving averages. This action
puts it up against the 1070/80 resistance level.

So what do we do? Friday was proof that a really overbought
market can become a really really overbought market. I hate these sharp
transition periods. The bottom pickers look like geniuses (please, no more
emails!) while momentum guys like me have to sit on my hands and wait for the
first pullback. However, other than the aggravating emails from the newfound
“experts”, this doesn’t really bother me. I know that if this is the
“real deal” there will be plenty of opportunities along the way. For
now, I think I’m going to stick with my recent mantra: Keep it light. On the
long side, focus on defensive issues such as consumer non-durables (or issues
that have outperformed the market before the run up such as gaming). On the short side, continue to focus on technology issues that
really haven’t taken off with the rest of the
market.Â No matter what you do, just make sure you wait for entries and
honor your stops.Â

Looking to potential setups, MGM Mirage
(
MGG |
Quote |
Chart |
News |
PowerRating), in the
strong gaming sector, looks poised to resume its strong uptrend out of a
pullback.