It May Be Time for Nasdaq to Hit the Exit Ramp

Since the March low, the Nasdaq has risen more than 40%. My question, then, is who the heck is still buying Nasdaq stocks?

I ask that because, over the past 10 years, each time there's been a 40% ramp, the market has cooled off for at least four months before heading higher.

By a ramp, I mean the kind of parabolic "melt-up" that's been the case since early spring. Those kinds of surges inevitably peter out and, even if we're in a bull market, tend to move sideways for a minimum of 100 days before resuming the trend.

Anyway, my take is that the best scenario plays out with some sideways congestion through at least February 2004. That should give the Nasdaq enough time to digest the gains from this year and provide a solid base to reach the 3K area and perhaps higher.

The worst scenario, though, would be a move right now of much more than 50%. If that happens, the next move might not be sideways as much as it would be a vicious splat down. See the post-'99 move for the gory details!

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Today, the Dow, AT&T Wireless (AWE - commentary - Cramer's Take), BellSouth (BLS - commentary - Cramer's Take), Biotech HOLDRs (BBH - commentary - Cramer's Take), Celestica (CLS - commentary - Cramer's Take) and Maverick Tube (MVK - commentary - Cramer's Take).

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Charts produced by TC2000, which is a registered trademark of Worden Brothers Inc.

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And that is the final word from the Eliot Bridge, where rower or not, I urge you to go out and get Craig Lambert's excellent book, Mind Over Water. Terrific life lessons.

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Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes a daily technical analysis column for RealMoney.com and also produces a daily premium product for TheStreet.com called The Chartman's Top Stocks -- click here for a free two-week trial. While Gary cannot provide investment advice or recommendations, he invites you to send your feedback to Gary B. Smith.

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