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THE MARKETS

Overall market stats:

VIX: 27.44; -1.78. After the spike to 34 last week it has been on a steady decline as the market moves up, something we would expect.

Put/Call ratio: 0.57; -0.11. Steep drop in the ratio as it hits the low end of its range that it has tracked for the past month. It did not take much to drop it back down even as the Nasdaq finished off a simply horrid February. No fear is the motto of the investor.

NASDAQ:

A mixed look. We hate the chart but like some patterns and the expressed negative sentiment. That negative attitude does not seem to be filtering out far and wide, however.

Stats: Up 61.51 points (+2.9%) to close at 2204.43.
Volume: 1.988 billion shares (+33%). A nice showing, but the gain is exaggerated given the light snowbound volume from Monday. It was still below average volume. Up volume came in at 1.527 billion shares versus 418 million on the downside. One commentator was crowing about the solid up volume today. Well, looking at February 15, the last day the Nasdaq gapped over the February down trendline, up volume was 1.621 billion shares to 426 million downside shares. That rally ended that day.
A/D and Hi/Lo: Advancing issues did move back in front of decliners, but it was not the rout that it was made out to be on the television. Advancers won the day 1.64 to 1. On February 15 the ratio was 1.5 to 1. Today was better, but it was not the 2 to 1 or 3 to 1 you want at the start of a real rally. New highs rose to 75 (+17) as new lows fell to 58 (-44).

The Chart: http://www.investmenthouse.com/cd/$compq.html

As noted above, the gap up to a doji that closed well off of its high and could not take out the 10 day MVA is not a really promising move. It failed on February 15, and volume was better that day. We will see what the big money does at this point: will it commit or again use the rally to sell? we need to stay the course: play the upside breakouts, solid momentum plays and downside on the moves that fail. If the rally is for real, we will have plenty of rides to take us where we want to go.

Dow/NYSE: The Dow went out like a mouse today, lucky to hang onto its gain after a 100-point deflation from its high. Disappointing move after tapping at resistance on its high.

Stats: Up 28.92 points (+0.3%) to close at 10,591.22.
Volume: NYSE volume jumped back up to 1.096 billion shares (+18%), but that was no magic with the weather problems on Monday. Up volume won at 722 million versus 366 million shares to the downside.
A/D and Hi/Lo: NYSE advancing issues led again, 1.55 to 1 (1.18 to 1 Monday). New highs fell to 118 (-10) as new lows fell to 9 (-8).

The Chart: http://www.investmenthouse.com/cd/$dja.html

Monday the Dow stalled in the last two hours, and today it stalled again and finished well into the lower end of its range for the session. A gain, but it did everything it could to give it back as it hit just below its 200 day MVA on its high (10,690.93) and retreated. Not the move of a champion, but the Dow did touch support at 10,300 three times last week before starting back up, so it has some firm footing below it for another run. It simply needs more volume, i.e., institutions to step in for another shot at 10,750. They are the missing ingredient on the upside action.

S&P 500: As noted, the big caps had a solid day, but they too closed well off of their intraday high as the afternoon fade took hold once again. One could argue it has a little double bottom going here, but it is not what we would call persuasive at this point. It has to make a move on strong volume to give us a follow through or confirmation of last Thursday's reversal on high volume. We need another gain of well over 1% with volume shooting above average. That would set the stage for more gains and allow stocks such as NVLS, KLAC, LLL, SDS and the like to break to new highs and lead for a bit.

Stats: Up 12.39 points (+1.0%) to close at 1253.80.
Volume: NYSE volume plowed higher to 1.096 billion shares (+18%).

The Chart: http://www.investmenthouse.com/cd/$spx.html

TOMORROW

A quiet day on the economic front tomorrow, but the void is being filled by the likes of JDSU and INTC. Seems the market cannot go one day without getting some kind of character test. It seems to be trying to develop some backbone here, but it has a lot of problems to overcome. Yes we see some potentially good patterns forming, and that has been one of the missing ingredients for any lasting move up. That bodes better for a bear market rally, but the indexes (all of them) need to get support from the institutions. We are watching for that on the S&P 500 as follow through, not to mention the other indexes. If it does not come we could see these recent moves stall out at resistance. Indeed, we continue to watch for moves that start to fizzle out as they approach support to play the downside in addition to those breakouts we get.

Futures are up 8 points over fair value on the Nasdaq and 4 points on the S&P. The JDSU warning and INTC chip prognosis have stocks down but not out. Last night we anticipated a modest open and got a barnburner. With this news we are looking for that modest open that will let stocks build during the session, not burn out. That is how we get solid breakouts that are easier to play as we can readily see volumes and movements. Plus, it is bullish action to see stocks start a bit weaker and then rally.

Patience and follow the game plan. We are looking at stocks forming patterns as they give us an edge. We sometimes want to move in before the break, but in this market that more often than not leads to trouble as sellers jump on early; it is best to get the breakout and let buyers rush in to confirm the move. On the downside plays, let the stock hit the resistance and start to fall back; we like to see the move start to fail before we jump in. Patience and discipline.

Support and Resistance Levels

Nasdaq: Closed at 2204.43.
Resistance: 2400 to 2500. Then 2650. 2890 to 2900 is next before the 3000 level.
Support: 2000 to 2050

S&P 500: Closed at 1253.80.
Resistance: 1285 to 1300. Then 1335. Then 1360 to 1375.
Support: 1200 is the next clear level.

Dow: Closed at 10,591.22.
Resistance: 10,750. Then 11,020 - 11,028. After that, 11,400.
Support: 10,300 - 10,400. Then 10,000.

Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.

3-5-01
NAPM Services, February (10:00): 51.7% actual versus 52.0% expected and 50.1% prior.

3-6-01
Productivity, Fourth quarter revised (8:30): 2.2% actual versus 2.0% expected and 2.4% prior.
Factory Orders, January (10:00): -3.8% actual versus -3.3% expected and 1.1% prior.

3-7-01
Consumer Credit, January (15:00): $5.3B versus $3.0B prior.

3-8-01

Initial Claims, prior week (8:30): 372,000 versus 372,000 prior.

3-9-01

Non-farm Payrolls, February (8:30): 88,000 versus 268,000 prior.
Unemployment Rate, February (8:30): 4.2% versus 4.2% prior.
Hourly Earnings, February (8:30): 0.3% versus 0.0% prior.
Average Workweek, February (8:30): 34.2 versus 34.3 prior.
Wholesale Inventories, January (10:00): 0.0% versus 0.0% prior.

SUBSCRIBER QUESTIONS

Q: What does Jon mean when he states that Relative Strength has broken out ahead of price, which is a bullish sign?
A: Relative strength is a measure of that particular stock versus some standard. Usually that standard is the S&P 500 as it is rather a broad measure of the overall market. On most charting programs you can put relative strength versus the S&P 500 as an indicator on the chart. When we see stocks in strong patterns, we like to see the relative strength strong as well. That means they are on top of the market. We like to see relative strength breakout of its range when a stock breaks out. That is an indication that the move is strong. When relative strength breaks out ahead of the price, that indicates the stock is holding up very well compared to the broader market. If the S&P 500 tanks and a stock you are watching holds steady, its strength relative to the S&P 500 will rise. Some would say it is doing nothing, but to the contrary, holding steady when the rest of the market tanks is very positive. As soon as the broader market stabilizes and makes a move up, that will usually trigger the breakout in the price that we are looking for.

TEAM TRADES

DELL: A play on the Monday Daily that looked good for a trade as the stock had closed right on top of its 50 day MVA Monday, breaking through a short term down trendline. Volume had been pretty good the previous session, so in a rally we were looking for a stronger move. DELL closed Monday at 23.44 on below average volume of 26.8 million (average volume is 36 million). The stock was featured on the Daily Monday night as a possible trading play up to 28-29.

The stock opened at 24.88 on a gap higher, topping its down trendline on the move. The stock received some favorable comments and was on the move. We decided to open a partial position right away and pick up more on a test. A few minutes after the open the stock was trading 24.88 by 25. We limited in at the ask. We then sat back and looked at other stocks while we waited for the test of the gap. Dell ran up and then pulled back to 25.88, but jumped back up once again. It tapped 25.88 a few more times before running up to 26.88 on the high. It then fell off to the close, dropping back to just over 26. Our target is 28 to 29, the recent January top. When it gets there we will not take chances and close it out if it starts to stall. If it breaks over that level on strong volume, we can make another run at it.

BJ: Decent but not a great move as no split announcement. A new closing high on excellent volume, so we were inclined to let the play ride for now.

For a review of frequently asked questions, please use the link below:

http://www.investmenthouse.com/1questions.htm

Good Investing!
Jon Johnson and the Tech Traders Report Staff.

All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.

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