May 19, 2000

This is one tough market.

There are days that many of the charts improve, showing strength in the face of an overall declining market. Those are the days I believe the market is bottoming. Then there are days where it seems every chart closes on its low and all I can see is deterioration.

The statistics aren't much help either. We get positive breadth for three or four days followed by negative breadth for three or four days. We get an increase in the number of stocks making new highs, only to see them retreat the next day. Then we get a big down day, the number of stocks making new lows contracts and I am encouraged. But then that's followed by an up day where the number of new lows expands.

Then there is sentiment. There's a certain level of complacency out there. I hear so many folks saying the same thing, myself included: The market needs time to repair itself and we can't expect it to do anything for an extended period of time. Every time this sentiment is echoed, I wonder how the market is going to allow so many of us to be so right. That's when I think the market is going to have a big rally or a big decline, just to make all of us wrong.

With the jump in the

Investor's Intelligence

bearish percentage this week (to 33.6%), we are still heading in the right direction for a bottom.

But if the

Nasdaq

is going to make a bottom, it's going to have to hold in this general 3200-3300 area. Just look at this long-term Nasdaq chart. If it doesn't hold this area, it will break the uptrend line it has held since the 1998 low. If that happens, the uptrend that has been in place for nearly two years will be over and subsequent rallies will fail. While there's support all the way back to 2200 on this chart, you can see that the long-term uptrend line, dating back to the 1994 low, comes in around 2000.

You can see how important it is that the Nasdaq holds here.

One Nasdaq stock that really needs to hold is

Qualcomm

(QCOM) - Get Report

. This stock has held its mid-90s level since the April decline. This is the fourth time it's come down to test the level. You can see from the chart that, should this stock break, it will gravitate toward the uptrend line I've drawn in, which comes in around 80. While you may say 80 is no big deal, it's only another 15 points and the stock is already down from 200, this stock has left layers and layers of resistance overhead, as each rally has brought the sellers out at lower and lower levels. That's what makes this chart negative.

On the flip side, I have noted several times now that the

New York Financial Index

hasn't gone down in the face of rising interest rates. While this index still can't manage a breakout, it has been outperforming the

S&P 500

lately. You have to squint to see it, but the ratio of the Financial Index to the S&P 500 has been steadily rising since the middle of March. When interest-rate sensitive stocks do well, it's usually a good sign for the market.

It's easy to see how there are reasons to be encouraged that a bottom is forming and reasons to be discouraged as the selling continues. The oscillators are still modestly oversold, so we may still see some movement to the upside early next week, after the options expiration is over. This would not be the kind of rally to turn this market around; I expect it would be just another jiggle back up, making very little progress and adding to our frustration.

Overbought/Oversold Oscillators

For an explanation of these indicators, check out The Chartist's

primer.

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.