Play It Close To The Vest

March 18, 2002
Dave Landry

On Monday, the Nasdaq gapped higher but quickly found its
high and sold off. Then, after chopping around, it managed to end slightly higher.

The S&P ended flat. This action keeps it below the 1180 resistance level.

The VIX continues to approach one-year lows.

So what do we do? The market continues to hang in there but
is showing some signs of stalling, especially with the S&P below the 1180
resistance level. And, again, the VIX remains low and is somewhat stretched
away from its 10-day moving average. If it drops to 10% or more below this
average (i.e., CVR III/CVR III Modified), we would likely see an accelerated
correction. For now, I think the best thing to do is to continue to play it
close to the vest. Stick with those issues on the long side that have done well
before the recent run up and have had orderly corrections as of late. Potential
sectors here are consumer non-durables, defense and auto parts. Just wait for
entries as many of these stocks were down on Monday.

Looking to potential setups, Lear Corp.
(
LEA |
Quote |
Chart |
News |
PowerRating), in the
strong aforementioned auto parts sector, looks like it has the potential to
resume its uptrend out of a pullback.