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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: T L Comiskey who wrote (5921)	10/5/2000 1:15:11 PM
From: T L Comiskey	Read Replies (1) \| Respond to of 65232

MarketBUG Bottom in momentum? By Michael Davey and Cedd Moses, CBS.MarketWatch.com Last Update: 1:05 PM ET Oct 5, 2000 NewsWatch Latest headlines SAN FRANCISCO (CBS.MW) -- For the first time in recent memory the market did not open higher on Wednesday, and that was a good thing. We finally saw a washout in share prices well ahead of the final hour of trading. In all likelihood we have seen the low in momentum for this correction, if not the low in prices themselves, maybe even for the beaten-down technology sector. For all the recent selling, the S&P 500 held above its recent lows, maintaining its up-trend. And while for the time being the Nasdaq still has to be characterized as being in a correction, action in that index appears to be improving. The Nasdaq reversed higher on heavy volume Wednesday, and we saw a dramatic turnaround in the leading Nasdaq stocks. Meanwhile, put-to-call levels from the CBOE finally reached levels that in the past have coincided with short-term market bottoms. We have been wary of the technology sector for some time, and warned at the beginning of September of the possibility of a rough pre-announcement period. Our quantitative 23 Industry Groups by Strength screen had alluded to potential tech trouble; throughout the month, meanwhile, financials, energy and healthcare continued to rank highly. The strategy of just owning Intel (INTC: news, msgs) and Microsoft (MSFT: news, msgs) for solid long-term gains became particularly disheartening in recent weeks, but the financial, energy and healthcare sectors provided profitable shelter. The slowdown in the economy hurt the high multiple tech shares, but has been encouraging to investors in financial stocks, as it suggests the next move in interest rates will be down. Technology has yet to emerge from the lower end of our industry groups screen, and a market weight of about 20 percent in technology-related stocks seems reasonable until it is clear they have emerged from this correction. Negative pre-announcement season remains in effect into next week, so the group may not be out of the woods just yet. In addition, the more broken down stocks will have a harder time recovering due to institutional and public tax-loss selling. New names That said, new technology names have begun turning up on our quantitative Top Scoring Stocks screen, indicating the potential leaders for the next rally. Some of these names sold off dramatically for a few days prior to Wednesday's turnaround, but their up-trends remain intact, and their charts still appear powerful. Valuations, which came under scrutiny as the correction accelerated, certainly affected this group, as suddenly anything related to technology was thrown out with the bath water, drawing down prices in stocks which had held tough prior to that point. Now a climax in selling may have been reached, and we favor the names that are moving up dramatically in our ranking, as well as the highest ranking stocks and the new names appearing on our screen. We're sticking with the leaders. In other action, Wednesday was a disappointing day for the energy sector, and the Oil Service group fell sharply on our industry groups screen. Also notable, the biotechs have slipped from their high ranking in this past week. The financial sector continues to dominate the upper end of our industry groups screen, along with the natural gas, pharmaceuticals and healthcare sectors. Technology, as we mentioned, is still lagging in our rankings, but we are watching the sector closely. If the worst is truly behind us it may not be long before the sector heats up, justifying increased exposure in the leading tech stocks. The quantitative screens and trading models mentioned above are published daily at MarketBUG.com. Good trading.