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wellspring of doubt that bubbled forth from yesterday's rally was reinforced this morning, as major averages opened lower after Banc of America Securities cut its earning estimates on


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, and



posted dismal quarterly results.

But optimists say all of that -- the doubt and the early weakness -- is a "good" thing.

"Right now, the market is both emotionally and pricewise doing what it has to do to get us as uptight as possible," Michael Paulenoff, founding partner of, said this morning during the market's bleakest hour. "This action is a little scary and anyone bullish has to be scared out of his wits. Emotionally, that is when

the market usually tends to hold."

Notably, stocks had improved markedly by midday following the release of the

Philadelphia Fed's

index of business conditions, which defied expectations for a decline by rising for a second straight month to its highest level since March 2000.

I called Paulenoff this morning to follow up on a conversation from late Wednesday, during which he expressed a belief that yesterday's session was "very important" and that "preliminary signals" suggested the reversal represented the "end of the entire corrective process from the December-January highs."

If the

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Nasdaq Composite

can close higher than 1880 on any ensuing rally, "we will have one helluva up leg that will surprise everyone on the Street in its power and magnitude," Paulenoff forecast, as I noted in's

Columnist Conversation.

Today, the technician explained that Wednesday's reversal was "minor" in that the Comp did not take out Tuesday's high of 1791.01, with 1777.18 being yesterday's intraday best. But he was encouraged that yesterday's low marked a 50% retracement of the rally from Sept. 21 to Jan. 9, and that momentum indicators showed the selling pressure was losing power, as's

Helene Meisler noted. The latter was a "warning sign that the risk to shorts was increasing and risk to people holding long positions was abating," he said.

At midmorning, Paulenoff said the key today was for the Nasdaq to hold the 1750 area, which represented a 60% retracement of Wednesday's rally. After falling as low as 1746.71 early on, the Comp was recently trading at 1761.

Similarly, he noted "big engines"


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needed to hold key support levels at about $58.95 and $15.30, respectively. At midday, each of the market-cap behemoths was off the morning lows near those levels.

If those levels are breached and further downside action follows, "then it would undermine what happened yesterday," and "break the back of support," Paulenoff said. Such an occurrence would suggest the Comp is headed toward 1600, he added.

While noting there are still "treacherous trading hours ahead of us," he reiterated a belief the market "should make a stand here."

If the Comp can eclipse 1880 short term, Paulenoff forecast the Comp could rise as high as 2400. Notably, he believes the index would "run out of gas there," stressing that he's "relatively bullish

now within the framework of a bear market that's not

yet complete."

Preemptive Strike

First, if any of the above sounds familiar, it could be because Paulenoff's view of Wednesday's session seems quite similar to that of other technicians after the market's midday bounce Jan. 30, as reported

here. (That Jan. 30 was also a Wednesday probably doesn't mean anything but makes for good conspiracy theories.)

That late-January rally call proved (


) less than prescient, but one of these "reversal days" has to augur better times, doesn't it?

Second, I know Paulenoff isn't a household name, except -- presumably -- in the Paulenoff household. Paulenoff worked for several Wall Street firms before founding MJ Capital in 1988 and then MJP Market Strategies in 1999. He was also an on-air market consultant and strategist for JAGfn, the ill-fated Webcast produced by JagNotes. The recently founded 2Mstrategies provides research and trading advice to institutions on financial and commodity markets.

Make of that what you will. But many readers have expressed a strong desire to hear from new and different voices, and I'm trying to oblige.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.