Having weathered warnings from Corning and Dupont Photomask, earnings cuts in the storage group from Goldman and a very negative call on PCs and Intel from Piper Jaffray's Ashok Kumar, the market spent a good part of Monday marking time. After all, who wanted to play the hero ahead of Tuesday's Federal Open Market Committee meeting? Clearly, the Fed has been talking up the economy recently, but Alan Greenspan seems to have become more inscrutable.

Yet, by day's end, the bull had wrested control of the market away from the nasty bear, with the widely despised tech sector and the financials leading the way. Hope indeed springs eternal, with more warnings at the door (KLA-Tencor and Solectron after the close).

There's little doubt about what investors, traders, economists and strategists clamor for, as summed up by one firm's weekly economic missive: "Markets to Fed: Give Us What We Need!" However, you'd be left counting chads to break the apparent tie between those who expect a 50 basis-point move and those looking for a larger cut. Considering that monetary policy is in a state of constant flux, what will happen Tuesday afternoon is little more than conjecture, but even more so this time.

Action in Financials

Fevered trading among individual investors has slowed to a trickle, yet brokerage stocks were among the best performers Monday, as financials helped to lead the market out of the doldrums in the afternoon. I'd continue to sell financials on strength. Earnings estimates for the full year still appear to be overly optimistic, but wait until the Fed's announcement. I simply have little confidence in my belief that we'll only see a 50 basis-point cut today.

Perhaps the best piece of news was Don Hays' jump into the bull camp Monday morning. It got my attention because he's been one of the savviest strategists around. Using what he views as the best technical tool ever, the 10-day Arms Index, Hays said that a new bull market will have already begun Monday, or it will within the next month, after the 10-day reading pierced the 1.50 level last Friday.

Curiously, Arms himself was more concerned with the Dow's violation of its secular bull market trend last week, and expects that the market will be stuck in a trading range for quite some time. We'll soon see if Hays is right because he didn't mince words about timing. In any case, folks who have been banished or have remained outside the sell side seem to have gained more stature as the wire houses haven't had much success in anticipating market or sector turns. However, Bank of America Securities strategist Tom McManus has been on top of his game and increased his recommended equity allocation to 65% from 60% Monday.

More Upside Ahead?

With the Nasdaq 100 holding almost all of its gain into the close, we could see more upside in the tech sector if the market's response to the Fed is positive or even just benign. The NDX's upside potential would be at least 200 points, and it looks like it will outperform the S&P 500 in the near term. My indicators are close to giving a buy signal on the Nasdaq Composite and NDX (not on the SPX), but Tuesday's action will determine whether a signal will be triggered. However, with earnings season approaching, unlikely to bring with it any clarity about the future, and with tax day also looming, which threatens large mutual fund outflows, the upside appears to be relatively modest. However, we'll continue to monitor the technical conditions.