This Market Still Rewards Patience

The market seems to move so fast these days that we have become accustomed to instant gratification. Instant gratification may be immediately rewarding, but patience is a virtue -- and many times it even makes you money.

Back on Jan. 29, I wrote a

column discussing the overabundance of splits announced by companies that month. However, in that same column, there was an entire discussion about three charts with big long-term bases that were buyable. I said these were good charts and that I expected them to reach their price targets, which in most cases were about 50% higher, within 12 months. There was a time investors would've jumped on board, regardless of the fact that it might take 12 months to move 50%. Heck, 50% in 12 months used to be an incredible move.

But, much to my amazement, I didn't receive one email about any of those charts. Instead, I received emails berating me for poking fun at all the big winners who were splitting their stocks. I even commented as much in my very next

column. It was pretty apparent that with Net stocks moving 50% in a month, no one was interested in waiting 12 for the same return.

I bring this up because one week ago I began writing about an anticipated correction. I even stated that I didn't think the correction would begin immediately; I said it was likely that we would need to wait a couple of weeks for the correction to set in.

Now here we are, only five trading days later, with the

Nasdaq

and the

S&P

having come off a bit from their highs, and already I'm receiving emails asking if yesterday was the low! I've even received one saying something about how we didn't get the correction I was looking for. Hey! It's only been five days!

Maybe it's not all that apparent in the averages and maybe not so apparent in all stocks, but I wonder if that guy who said we didn't get "the correction I was looking for" has taken a look at

Delta

(DAL) - Get Report

, which is down to 62 from 72 in a straight line. Or how 'bout

Gap's

(GPS) - Get Report

10-point slide? Or what about

General Electric's

(GE) - Get Report

fall? There's also

Schering-Plough's

(SGP)

8-point move to the downside. And don't forget about

Applied Material's

(AMAT) - Get Report

tumble to 50 yesterday from a high of 72 (although it was already at 62 last by Friday).

What's most interesting about these stocks is that they are each in very different groups, yet all are well off their highs.

Now it's true that there are plenty of stocks out there that do act well. The major improvement in the advance/decline line is testament to that. And there doesn't seem to be a whole lot of selling pressure taking place on the downside. But it's still early. The oscillator is still overbought, and after a move with so much upside momentum, we can't possibly expect it to roll over that fast. It just doesn't happen that way.

It takes time to change sentiment from too bullish to more cautious. It also takes time to use up that hoard of cash that's been flowing into the market. I fully expect several technology stocks will try the upside again, especially now that everyone knows that tech is out and cyclicals are in. Besides, many of cyclical stocks I chart are overextended and in need of a rest or consolidation. I can tell by the failing number of stocks at new highs. It's the cyclical stocks which are on the list, and the list is no longer expanding.

Alcoa

(AA) - Get Report

has had a great move; it's buyable into another dip.

AlliedSignal

(ALD)

and

Caterpillar

(CAT) - Get Report

are also good cyclical charts in the

Dow

. Don't chase 'em, though.

Goodyear

(GT) - Get Report

has pulled back nicely and is OK right here.

General Motors

(GM) - Get Report

has been going sideways for months now and looks like its consolidation phase is almost done.

Elsewhere,

Colgate

(CL) - Get Report

is still a good chart with a longer-term (there's that phrase again!) target near 130. A new name on the positive side is

Fannie Mae

(FNM)

.

On the negative side,

McDonald's

(MCD) - Get Report

is still on the list, but I think it's best to sell a bounce to 43/44 now.

Merck

(MRK) - Get Report

held its support fairly well now; sell it on a rally back to 74 to 76.

The retailers are still vulnerable and can be sold into a bounce. Gap,

Dayton-Hudson

(DH)

and

Home Depot

(HD) - Get Report

come to mind.

Merrill Lynch

(MER)

will be awful if it breaks 83.

With the advance/decline line acting so well and many of the big winners already well off their highs, it is most likely that when this all-too-bullish attitude abates and the market reaches an oversold level, I will be pounding the table on the buy side. But until that time, I remain cautious and will practice something I'm not very good at -- patience.

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. 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.