Rumor Rally?

May 22, 2002
Dave Landry

On Wednesday, the Nasdaq opened weaker and after a brief
early morning rally, began to chop its way lower. Then, late in the day, the
index rallied on the rumor that someone had busted a cap into Bin Laden. This
action has it closing well.

The S&P put in a similar performance.

So what do we do? The $64,000 question is: Will the market
hold onto its gains now that the “news” of Bin Laden has been denied
by the Pentagon? From a purely technical perspective, it looks like we are
beginning to bounce from oversold. Therefore, should the market continue its
bounce, look to nibble on the long side in issues that have outperformed the
market on a relative basis (e.g., banks). No matter what you do, you might want
to keep it light since volume will likely dwindle as the holiday weekend draws
closer.

Looking to potential setups, Charter One Financial
(
CF |
Quote |
Chart |
News |
PowerRating),
in the strong S&Ls (and let’s face it, who would put their money into a weak
S&L?), looks like it has the potential to resume its uptrend out of a
(micro) Running Cup and Handle.