The Cavalry Invades Trumbull

SAN FRANCISCO -- In a repeat performance of a dance that shows no signs of going out of style, the

Nasdaq Composite Index

set another record

today. However, I will note the hustle, the twist and the "Achy Breaky Heart" all seemed unstoppable at one point or another.

Almost more importantly (to some) than the latest record, traders reported smooth trading executions via

SelectNet today, save for delays at the opening that have become the norm.

Thus, last week's

shutdown of SelectNet, an automated trading service that enables broker/dealers to trade with each other electronically, seems to be fading from memory as nothing more than a "bigger-than-expected" nuisance.

Yet behind the scenes, executives of the securities industry's biggest trade group (no pun intended) today made a pilgrimage to Nasdaq's main technology center in Trumbull, Conn. And they weren't looking for salvation.

"We're trying to get some answers up here," Lee Korins, president and CEO of the

Security Traders Association

, said during a break in the meetings. "It's not a question of Nasdaq sticking their head in the sand -- they're working hard to address the shortcomings

and are doing some things up here that will somewhat alleviate the problem.

But I'm not sure there's any substantial near-term fix."

Although obviously disconcerting, last week's shutdown is not as big a concern as the now rote slowdowns in Nasdaq's reporting system, Korins said. "I think it makes for situations where people are suffering losses because of the slowdowns. Those are things that have to be addressed."

In a Nov. 12

letter to

National Association of Securities Dealers

president and COO Richard Ketchum, Korins wrote:

These SelectNet delays cause credibility problems for dealers and firms with customers and sales personnel as reports, when finally received, reflect prices of a time passed and may not be indicative of current market levels. In addition, these SelectNet delays create massive inventory problems for each and every dealer since position updates are singularly dependent on Nasdaq reports. In some cases the resultant delays have cost dealers thousands of dollars in position losses due to their inability to monitor inventory positions and to effectively manage risk.

Korins refrained from providing specific information about the tenor and outcome of today's meetings, saying he wanted to inform the STA's membership first.

A Nasdaq spokesman did not return a phone call seeking additional comment.

In an interview late last week, the exchange's spokesman made a distinction between Nasdaq's "network" and its "data center." The network is capable of handling up to 2 billion shares a day and is "scalable" up to 8 million shares, he said. It's the data center that "they're in the process of upgrading," he said, suggesting last week's shutdown originated during that undertaking.

Translation (as one market player recently emailed to point out): The Nasdaq system can more easily digest one trade of 50,000 shares vs. five trades of 10,000 shares.

I return to this subject today (and will again if/when it's necessary) not because I want to "spook" anyone out of the market. But ironically, as more people get into the market and the more excited they get about it, the less stable it's becoming.

The idea that tech stocks are a house of cards has been proffered so often in recent years that it's gone beyond cliche, and the recent string of Nasdaq records only makes it seem more so. But if the over-the-counter market itself is built on shaky foundations, no amount of valuation expansion can save traders --- professional and retail alike -- from suffering an awful lot of grief when it trembles.

Salmon of the World, Unite!

"The rally of the past month has extended many market leaders in technology," Paul Rabbitt, president of

RabbittAnalytics.com

, said in a report today entitled, "Time to Swim Against the Current."

In a follow-up interview this afternoon, Rabbitt mentioned

Qualcomm

(QCOM) - Get Report

as an example of a stock he's long recommended but is now "impossible to buy." (Well, maybe not impossible, but perhaps "ill-advisable.")

On

CNBC

this morning, Rabbitt discovered his picks from an Oct. 25 appearance --

National Semiconductor

(NSM)

,

Integrated Device Technology

(IDTI) - Get Report

and

Ciena

(CIEN) - Get Report

-- were up an average of more than 50%.

"I know I'm not that good," he quipped.

It's not that Rabbitt, who described himself today as a "screaming bull for the past six years," is turning negative. He believes the bull market remains intact but investors need to "change horses" in order to continue to ride it (mixing metaphors in a way in which I'm admittedly jealous).

The strategist is neither raising cash nor changing his overweight in tech stocks, currently 26% of equity exposure. "But I'm not adding to or chasing these stocks that are up," he said.

Instead, he believes investors should begin to focus on "downtrodden, value and small-cap" stocks, which in many cases are one in the same.

In the report, he mentioned names likely to get a bounce in the aftermath of tax-loss selling, including

Family Dollar Stores

(FDO)

,

Navigant Consulting

(NCI) - Get Report

,

Reader's Digest

(RDA)

and

Providian Financial

(PVN)

.

Other favorites include

Parker-Hannifin

(PH) - Get Report

,

Occidental Petroleum

(OXY) - Get Report

,

Apache

(APA) - Get Report

,

Newmont Mining

(NEM) - Get Report

,

Wal-Mart

(WMT) - Get Report

,

Citigroup

(C) - Get Report

and

Pfizer

(PFE) - Get Report

.

However, the list of favorites also includes tech plays such as Ciena,

Micron Technology

(MU) - Get Report

and

eBay

(EBAY) - Get Report

, suggesting it's hard for the horse-riding bull named Rabbitt to change his stripes.

Orson Welles Is Smiling

Belated recognition to

Bell Atlantic

(BEL)

for its press release Friday informing anyone concerned that Sunday's

NBC

movie

Y2K

was "fiction -- not reality."

I admit sometimes being confused, but what's

really

frightening is that Bell Atlantic felt compelled to help the public make the distinction between fiction and nonfiction.

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

taskmaster@thestreet.com.