In the midst of a correction. That's where we are.

The momentum indicators are rolling over and signaling their tiredness. The

Dow Jones Transportation Average's

brief flirtation with new highs never materialized to much more. Instead that index is down nearly 200 points from its high, never having confirmed the new highs in the

Dow Jones Industrial Average


Now we need to start the process all over again. First, stocks need to relieve their overbought reading and get oversold again. Next, the downside momentum must slow, and the number of stocks making new lows must begin to shrink. Corrections are the process by which the old leadership is discarded and the new leadership emerges. It's the market's way of shaking out the weak holders.

One of the things I try to do when the market is correcting is figure out which group is showing relative strength into the decline. The theory is simple: If a group doesn't go down when the market does (or goes down less), then it's likely under accumulation.

Of course, sometimes certain stocks just don't participate on the downside because they are underowned. Heck, if no one owns 'em, who's gonna sell 'em? Sometimes it's easy to see what's overowned: Those are the stocks that come down easiest during a correction.

I pay attention to this because whichever stocks hold best into a correction will likely emerge as market leaders on the next rally.

For the past several days, since the market began its try at Dow 10,000, my positive list has been littered with those old consumer nondurables. We used to call them defensive stocks, with the thought that if the economy turned down, people would still eat, drink, wash and smoke. I imagine with the economy so strong, it's just not a topic of conversation these days. Since I am certainly not an economist, I would not hazard a guess as to why these stocks are showing relative strength, so I am happy just being the reporter.

The first stock I'd like to report on is


(BUD) - Get Report

. It's been a great stock during the past several months, but in the recent 10% rally, this stock just went sideways. For three weeks, it's done nothing. Even its volume had slipped from nearly 2 million shares a day to just more than 1 million. Now BUD seems well rested and ready to rally again.

Another stock in the beverage area is


(KO) - Get Report

. This stock is trading about 15 off its October low and down 20 from its summer high -- smack in the middle. But it's been doing this sideways action for about six months now. Its breakout two weeks ago came on big volume, which is shrinking on this pullback. I call this base-building, and it makes Coke a standout.

One other chart in the defensive group that continues to trade well is

Procter & Gamble

(PG) - Get Report

. It even made a new high yesterday! (And we can only say that about 35 other stocks on the


.) Procter's base goes back to last summer, when it last traded in the 90s. This stock should continue to show relative strength and can be bought into dips.

As the market continues to be overbought, the current momentum is on the downside. These defensive stocks have shown relative strength thus far, and I continue to expect they will be the next favorite group when upside momentum has returned.

So, if these stocks are acting well, what is not acting well and therefore taking the market down? Ah, our friends, the tech stocks.

Have a look at


(DELL) - Get Report

. Its revenue shortfall in February took the stock to 38. It rallied all the way back to the mid-40s, but fell to a lower low yesterday at 37.


(ORCL) - Get Report

chart shows a similar pattern. So does


(T) - Get Report

. Stocks that make lower highs and lower lows are not showing relative strength; they are leading the market down.

The performance of these stocks is why we care about the number of stocks making new highs. Technology stocks had been leaders, and therefore those were the names we read on the new-high list each day. When those names stopped appearing on the new-high list, a red flag went up. Now that the Dow and


have rallied to new highs, we can see what's lagged: tech. Even the


couldn't muster a new high last week.

Some other technology names that have failed to make new highs but have not yet made new lows include

(AMZN) - Get Report





Applied Materials

(AMAT) - Get Report

. I consider these stocks quite vulnerable here.

With the market in the midst of a correction, it is best to wait for a better buying opportunity. Currently the defensive names mentioned above appear to be the group that will emerge with relative strength when the correction is over. There will likely be a lot of jitters in the market for the next couple of weeks. Not only does the


meet next week, but the end of the quarter is also a time when we hold our breath as companies begin to preannounce their earnings. For now, let the downside run its course.

New Lows

Cumulative Advance/Decline Line

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 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 was long AT&T, 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