Shoot!

I should have been more aggressive in the past two weeks. Damn. I felt so badly about my performance that I took a walk to see my priest after the market closed Thursday. The conversation went something like this:

Me:

Forgive me, Father, for I have sinned. I should have been more aggressive on this market. And sorry about saying "damn" on the way over here! You couldn't actually hear it, but as long we're talking and all. But sometimes this business can be so

vexing

.

Padre:

Well, tell me what went wrong. Why weren't you more bullish?

Me:

Because except for a big oversold reading and good put/call data, there was no technical improvement in most charts. Very few base patterns exist; there are many stocks in big downtrends. There hasn't been a 90% upside volume day for either the

Nasdaq

or the

New York Stock Exchange

, which would make identifying a reversal a little easier, and there has really been no breadth thrust.

Besides, it's not like this sort of attention-getting bounce hasn't happened before. We've all seen this sort of action a lot over the past year or so, like the 41% bounce in the Nasdaq from May to July 2000 (using intraday values), the 29% bounce in the Nasdaq in January 2001 (intraday values) and the 42% bounce from April to May 2001 (intraday values). Each time it's been right to go with "bounce" and not something more important. And frankly, Father, even when I've actually caught a move higher, I've been surprised at how ephemeral each bounce has been.

Padre:

Fine. So while I'm figuring out your penance, why don't you tell me what you think will happen now? Sometimes removing the guilt enables us to focus more clearly. And perhaps more importantly, don't you think I should be averaging into my

Qualcomm

(QCOM) - Get Report

here?

Me:

Sure. Thanks, Father. OK, I've been going with the following targets on the upside for the major averages: 9442.74 for the

Dow Jones Industrial Average

, 1140 for the

S&P 500

and 1815 for the Nasdaq. But I'm reluctant to get more aggressive here for these reasons:

    Despite the Nasdaq's 5.4% gain Sept. 24, a 5.9% jump Oct. 3, a 3.6% gain Oct. 10 and a 4.6% move Thursday, volume statistics say the advances haven't been as dramatic as the external percentages suggest. It's my experience that tenured moves usually start with advancing volume at 90% or more of total volume. Despite the eye-opening action from those four days, advancing volume as a percentage of total volume hasn't surpassed 87%. I don't want to sound ridiculous and claim that market advances cannot continue, because they can. From my point of view -- and here's where I'm most aggravated -- the Nasdaq does look like it has more juice in it than the blue-chip-type stuff. That's where I should've been more aggressive. Damn! Oops. Anyway, I'm just saying that I don't believe the action over the past few weeks is the beginning of a bull market. I'm still going with the idea that this is a rally in a major downtrend, and I expect that there will be a retest of some sort ahead. It's also my experience that if a new bull market is going to begin, the initial stages will involve a rally or a series of rallies in which all stocks participate. You know, the "rising tide lifts all boats" scenario -- at least until portfolio managers can sort out the action and then decide which groups/stocks to overweight. Again, while Nasdaq has been smokin' lately, I find it just a little curious that stuff like Fannie Mae (FNM) , Freddie Mac (FRE) and Household International (HI) - Get Report don't act well. The American Stock Exchange Pharmaceutical Index, or DRG, has done nothing in the past nine days: It has stalled at resistance at the 400 level and is trading in the tightest range between its 50- and 200-day moving averages. I think we can guess why these stocks haven't done well. You know, there's the trade out of these "relative" performers into stocks with more gas, but like I said before, if this were going to be the beginning of another bull phase, the participation rate would be higher. Lastly, Father, I still believe it's a better idea to reduce than add to General Electric (GE) - Get Report, bank stocks, especially Citigroup (C) - Get Report and Qualcomm at these levels.

John Roque is the technical analyst at Arnhold & S. Bleichroeder, a New York-based investment brokerage firm specializing in Europe and the U.S., and a frequent guest on CNBC. At time of publication, Roque had no position in any of the 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. He appreciates your feedback and invites you to send it to

John Roque.