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Strategies & Market Trends : Take the Money and Run -- Ignore unavailable to you. Want to Upgrade?

To: Alan Smithee who wrote (16402)	8/28/2002 9:35:52 PM
From: MulhollandDrive	Respond to of 17639

The Big Picture Thursday, August 29, 2002 Market Succumbs To More Selling As Leaders Retreat BY CHRIS GESSEL INVESTOR'S BUSINESS DAILY Failed breakouts continued to wash up Wednesday as the stock market slumped. Saddled with another bad day for big techs and chips, the Nasdaq led the market lower with a 2.5% loss. The small-cap S&P 600 retreated 1.9%, followed by a 1.8% drop for the benchmark S&P 500. Volume eased from Tuesday, a day of distribution. But a sell-off in lighter trading offers little consolation when leading stocks roll over left and right. Indeed, it's been the dreadful action among recent breakouts that confirmed the market's monthlong light-volume rally was in trouble. Wednesday's worst casualty was Advanced Neuromodulation Systems (ANSI). The maker of implantable electrical devices that stop chronic pain slid nearly 10% to 32.15. A flurry of insider sells, which the company defended as normal, helped trigger the sell-off. The stock broke out last week and hit a high of 37.25. Other tottering breakouts included Penn National Gaming (PENN), down 6.4%, and H&R Block (HRB), off 1.8%. Established leaders, such as J2 Global Communications (JCOM), took heavy hits. J2 specializes in paperless messaging and communication services. The stock had defied the bear market's prior leg down. It broke out in April and rallied as much as 172% as of Tuesday. J2 dived 5.15 to 18.71 in the heaviest down volume of its advance, a classic sell signal. Potential leaders also sold off. Activision (ATVI) had been working on the right side of its base. The video game maker fell 2.08 to 26.66, its second straight day of high-volume losses. But Corinthian Colleges (COCO) jumped 2.18 to 34.20, closing just beneath its pivot point. The stock has built a somewhat V-shaped cup-with-handle base over the past nine weeks. Buying fresh breakouts in this environment is a risky proposition. More than half of recent breakouts have failed. Many of those that remain above their buy points are barely hanging on. The S&P has logged three days of distribution over the past dozen sessions. While the fizzling rally may be depressing, it illustrates the value of analyzing the market day to day. No one truly knows where the market will be next month, next quarter or next year. What you can know with certainty is the current state of the market. When stocks reversed July 24 in record NYSE volume, signs of panic were cropping up all over the market. Bearish puts had exceeded bullish calls, NYSE volume was running higher than Nasdaq volume, investment advisers were bearish, the CBOE market volatility index spiked up. All these sentiment indicators were at critical levels usually reserved for market bottoms. Four days later, the Nasdaq and S&P 600 followed through with gains of 2% or more in heavier volume than the day before. The one caveat? Nasdaq volume barely exceeded its 50-day moving average, an unusually timid way to ring in a change in market direction. Volume continued to straggle in, even as the Dow and S&P 500 delivered their own follow-throughs 10 days into the rally. But stocks started to break out in the following days. At first they acted fine, although not especially powerful. But that changed in the past week as breakout after breakout failed. Cutting losses and taking quick profits have pushed growth investors safely into cash. You didn't need a crystal ball. Just sound trading rules and knowledge of how healthy markets act day to day.