Can We Have Some Fear and Panic, Please?

The Chartist says that a few more days of tech selling could instill some fear in this market. Tell us what you think on our message boards.
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Sept. 24, 1999

So it wasn't interest-rate fears this time. And it wasn't the dollar. And it wasn't a speech by a

Fed

governor. Nor was it an economic indicator. It wasn't even an earnings disappointment. It was a comment by a nonmarket player about valuation.

Tell us what you think on our

message boards.

According to all the news reports I've seen, it was

Steve Ballmer's

comment about

Microsoft

(MSFT) - Get Report

and other technology companies being overvalued that rocked the market yesterday. Now, wait a minute. Are you trying to tell me investors didn't know these stocks had high valuations? This is news? I don't think so.

But it is a sign of just how nervous investors really are, just how overowned these stocks are and, more important, just how vulnerable these stocks are to huge bouts of selling. And one by one, we've been losing groups to that sort of selling since the April highs.

As money has poured out of other groups, it has been pouring into technology for lack of anywhere else to go. First it was the cyclicals as they lost ground from their highs. Then it was the airlines, which cited higher oil prices. Fair enough. But if you're going to sell the airlines because oil is going higher, then why not buy the oil stocks? Nope, the oil stocks made their highs right along with the

Transportation Average

.

And don't forget the money that came out of the drug stocks. Of course, the banks saw money depart well before any of these groups. Then money rotated out of the retailers. And recently, it's been the consumer stocks.

Look at that list of groups that are in downtrends. What group is missing? Technology. If man does not live by bread alone, then certainly a stock market cannot survive at new highs on one group alone.

I wrote

recently about some of the statistics we would want to see before we could call for a bottom. One of those statistics is the overbought/oversold oscillator. This indicator has been oversold since Aug. 31, yet the

Dow

and the

S&P

have refused to rally. Instead, they chose to decline. It is said that the sign of a truly weak market is one that gets oversold and stays oversold. (The reverse is true for a strong market; it gets overbought and stays there.) With that in mind, it's easy to see how weak this market really is since it cannot seem to rally from this grossly oversold condition.

Another item I mentioned was fewer new lows. Well, believe it or not, we did not see a great expansion in the number of stocks at new lows in yesterday's selloff. That is a positive we should not ignore. However, with the selloff taking place so late in the day, it is my preference to wait a day or so before making a big deal over it. A big down opening with fewer new lows is what I'd like to see to call this a real positive divergence.

A big down opening would also do a lot to bring about some panic in this market. Remember the panic and fear from last September and October? That's the sort of action that can clean out these sellers. And unless we clean out the sellers, we cannot have a low worth buying for.

While I normally don't care so much about particular levels in the big three averages, we are at a point where some levels may be important. First, the Dow. Its 200-day moving average line is around 10,250, not very far away. In addition, if we measure the pattern that it broke down from the other day, it measures to around 9700. Now, while that may seem like a wide range, don't you think that a break of that mighty 10,000 level would bring about some real panic in the market?

As for the S&P, I have certainly received enough emails about the head-and-shoulders top in that average. And here we are sitting right on the neckline at 1280. Certainly a decided break of this level would bring about some real fear and panic.

The

Nasdaq

, as usual, is a different story altogether. It is still sitting just shy of its highs and not at any critical juncture. I don't have any particular level I believe will bring about fear and panic there. But it does have some good support around 2600.

As for individual stocks, my best group remains the foods.

General Mills

(GIS) - Get Report

should really hold in here or else it will begin to look like another stock gone bad. But

Kellogg

(K) - Get Report

and

Sara Lee

(SLE)

are holding up just fine into their corrections.

I am also going to keep my eyes on the financials, which saw precious little selling on Thursday. While one day does not make a trend, this group certainly bears watching.

On the negative side, you can pick from almost any group. The retailers are still in trouble.

Dayton Hudson

(DH)

,

Limited

(LTD)

and

Nordstrom

(JWN) - Get Report

continue to top my list. In techland, I know everyone thinks I'm nuts for not liking

Oracle's

(ORCL) - Get Report

action, but I still think it is quite vulnerable in here. And

Yahoo!'s

(YHOO)

action yesterday is quite similar to its reversal in July.

The deterioration trend in the market continues. The only reason yesterday's decline was so newsworthy was that it's the first day beloved tech got whacked too. Maybe a few really ugly days of tech selling are what it will take to get some fear and panic into this market. I don't know if that's what it will take, but I do know that no fear and no panic mean no bottom.

Cumulative Advance/Decline Line

New Highs

Helene Meisler, based in Singapore, writes a technical analysis column on the U.S. equity markets on Tuesdays and Fridays, and updates her charts daily on TheStreet.com. Meisler trained at several Wall Street firms, including Goldman Sachs and Cowen, and has worked with the equity trading department at Cargill. At time of publication, she held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback at

KPMHSM@aol.com.