Two Important Patterns To Watch

January 14, 2003
Dave Landry

On Tuesday, the Nasdaq opened flat and generally chopped
its way higher. It then chopped sideways to lower for most of the afternoon.
Finally, late in the day it was able to rally. This action has it closing well
and keeps it above its 200-day moving average.

The S&P also managed to close well after quite a bit of
chopping around. Once again, it remains below its 200-day moving average.

So what do we do? The continued relative low
VIX and 3-day average NYSE TRIN readings suggests that we could see a
round of market-timing sell signals soon. On the bright side, many sectors such
as telecom, software and Internet are forming high level (“running”)
cups. So, the magnitude of the sell off from the signals could determine if we
will end up with bullish cup and handles or bearish double tops. Therefore,
probably the best thing to do is to continue to keep it light (this is good idea
anyway based on recent choppy action) while this situation resolves
itself.

Looking to potential setups,
Sprint
(
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PowerRating), mentioned recently, still looks like it has the
potential to resume its uptrend out of its first pullback since breaking out of a high-level
cup-like formation.