Just when we thought it was safe to forget about Y2K, it came back to haunt us on Tuesday. A comment from

Lucent

(LU)

about Y2K during the company's conference call sent technology stocks into a tailspin. Wednesday brought some bottom-fishing in those tech names, just before they got whacked again on Thursday by

Alan Greenspan's Humphrey-Hawkins

testimony. Does this mean Friday will see a return to bottom-fishing?

Maybe. But that's not what we should focus on. The focus should not be on overbought or oversold here. That's short-term stuff. It's best we look at the underlying shift in the trend that's taken place.

When we look at the

Nasdaq's

performance relative to the

Dow

, we can see that as soon as the Nasdaq's outperformance peaks relative to the Dow, the Nasdaq (and technology stocks in general) goes into a prolonged correction period. The peak at the end of January coincided with a 300-point, or 12%, correction in the Nasdaq. The Dow's correction during that period was only about 6%. It took almost six weeks for that trend to reverse itself.

In early April, we once again saw a peak in this indicator. At that time, the Nasdaq fell about 300 points, or 11%. And what did the Dow do? It rose about 10%! This indicator rolled over again early this week. We may find, as we did in April, that the Nasdaq snaps back up for a few days only to come down again, or it may just keep heading down. Either way, it appears we are in for a period of technology underperformance over the intermediate term.

In addition to this, the Nasdaq market has not yet reached a maximum oversold level. Sure, it can rally here and there, but it's more likely to have a downward bias until it reaches a maximum oversold condition.

So, what about the

NYSE

? Turns out the NYSE has its own problems. Since so many stocks did not participate in this recent rise, the statistical picture there is not great either.

As I've been harping about for weeks now, the number of stocks making new highs on the NYSE has been abysmal. However, as long as the number of stocks making new highs on a 10-day moving average is trending higher, there's still some upside left in the market. That trend changed this week.

And if you look at the new highs minus the new lows on a 10-day moving average, you can see that trend has rolled over as well.

Finally, the

McClellan Summation Index

rolled over this week, too. The index is an indicator based on market breadth. It is more like a long-term oscillator. Its reversal indicates a more intermediate change in the trend. In addition to this indicator rolling over this week, you can also see how much less momentum this recent rally had than the spring rally. Not only did it fail to come close to those spring highs, but it hardly budged off the zero line during this entire upward move. And now, it too is heading down.

These factors, coupled with the all-too-bullish sentiment (although I can see that shifting these past few days) says it's still too early to think about buying the dips in these recent fallen angels.

Finding stocks to buy has been quite a challenge for me of late. First, I noticed the oversold airlines. They acted great in the face of rising oil prices and a spate of bad news ... for one whole trading session. OK, maybe it was two sessions. Big deal. Then I noticed the financial stocks and thought they might be due for a bounce.

Bank of America

(BAC) - Get Report

slid,

American Express

(AXP) - Get Report

churned and

Chase

(CMB)

tested its uptrend line. Oh, boy!

But the financials really did outperform all else yesterday. I am not so sure how long that can last, and I'm not so sure I trust these stocks on the upside either.

American International Group

(AIG) - Get Report

is probably the best of this group in my pile of charts.

In the Dow,

Alcoa

(AA) - Get Report

hangs in there, and so does

3M

(MMM) - Get Report

. In addition,

Johnson & Johnson

(JNJ) - Get Report

continues to be a positive chart.

Merck

(MRK) - Get Report

is not a great chart by any means, but it is oversold and has support at 66.

Outside the Dow, I still like the

Gannett

(GCI) - Get Report

chart.

Bristol-Myers Squibb

(BMY) - Get Report

bounced off its uptrend line rather well. I'd like to see

Kellogg

(K) - Get Report

back off a buck or so before buying, but that chart is developing into quite a bottom.

On the negative side, technology stocks are likely to go through the same sort of prolonged corrective moves we saw after the January peak.

IBM

(IBM) - Get Report

has broken a similar uptrend line to its January action. We can now expect consolidations to take place in these names.

Xerox's

(XRX) - Get Report

break was very real. It is a sale into any rally.

Sears

(S) - Get Report

should be sold around 44 to 46.

J.C. Penney

(JCP) - Get Report

is still hanging by a thread.

Schering-Plough

(SGP)

halted its rise just as it reported better-than-expected earnings.

Now that Greenspan's hawkish words have spooked us, we can expect the market to act nervous as we wait for each new government statistic to be released. It is likely this will overhang the market for the next few weeks as we watch for the

employment report

and the Fed's next meeting. This summer may turn out to be more like

Chevy Chase's

Vacation

rather than a day at the beach.

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.

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