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As much as I like the market's tone today more than yesterday (and certainly yesterday more than Tuesday), I don't think the corrective phase is over yet. There's still a number of reasons why I think the corrective phase may continue through the second quarter.

  • There's been no surge in the number of put options relative to call options -- despite the 29% decline in the Nasdaq from the intraday high on March 10 through the intraday low (and down 18% on a closing basis from March 10 through April 4). Low put/calls in the face of a big decline smacks of complacency, not fear or capitulation. Was it Nietzsche who said, "Fear is a much better builder of bottoms than is complacency"?
  • My experience suggests corrections are the combination of price and time. While we've clearly seen the price component, the time component has yet to be fulfilled. Two items suggest to me that the Nasdaq will have to pay the time toll, too. Consider first that the net number of new highs on Nasdaq collapsed from 212 on March 7 and 10 to minus 67 on April 4. Similar collapses in the Nasdaq since 1996 have been followed by the index touching its 200-day moving average (except in 1999, when the spread narrowed to 5% on Aug. 10). Since 1990, historical precedent suggests the Nasdaq will move sideways for the next few months. From 1990 to 1999, it has gained on average 4.7% during the second quarter. A 4.7% gain from the close on Tuesday would put the index at 4344. However, if we X-out the 14% gain in 1995 (which occurred after the Fed had ceased tightening rates -- something we all know has not yet happened), the gain during the second quarter drops to 3.6%. A 3.6% gain from Tuesday's close would put the index at 4298. Suffice it to say, you're not feeding a lot of mouths on a 3.6% gain over the next few months.
  • Tech has not yet shown it can absorb bad news. Check out the action over the last few days in Legato Systems (LGTO) , Parametric Technology (PMTC) , Unisys (UIS) - Get Unisys Corporation Report, and a little baby named Microsoft (MSFT) - Get Microsoft Corporation Report for evidence. The ability to ignore bad news or embrace good news will be a positive sign. But we're not there yet.
  • The European counterparts of the Nasdaq -- the Paris CAC, the Frankfurt DAX, the Milan MIB30, and Madrid's IBEX -- don't act well either, and the inability of the London Stock Exchange to open and provide prices/liquidity for two days last week certainly doesn't build any confidence!

My Take:

I don't think the correction in tech is over. Support for Nasdaq is 4000 to 3900; then 3750; then Tuesday's intraday low of 3649.11. Meanwhile, resistance on the upside at the 4500 level is likely to present too much of an obstacle for the index to break through near term. Rallies above 4500 should be used as opportunities to lighten long positions in stocks that got whacked like Richie Aprile on last week's penultimate episode of

The Sopranos

.

Charts I Like

I continue to like

American Power Conversion

(APCC)

(

reviewed March 20 ),

American Management Systems

TheStreet Recommends

(AMSY)

and

ICG Communications

(ICGX)

(the latter two were reviewed

last week).

Another stock sporting a strong pattern is

SCI Systems

(SCI) - Get Service Corporation International Report

:

There's a steady uptrend on both a daily and weekly basis, and the stock is supported by upward-sloping 50- and 200-day moving averages. The stock based for three months between December and February (between 35 and 44), broke above 44 in early March, then consolidated again for three weeks, before working above 50. Since then, it has been mostly between 45 and 55 (except for a day last week when it traded as low as 41 7/8). I think it breaks out above 55 and works to 65 as a first target. Best stop is 44 3/4.

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. Roque appreciates your feedback at

jroque@thestreet.com.