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Where Only Fools and Traders Dare to Tread

Volume is down, as it seems the only people trading are those compelled to do so.

As it became clear that resolution of the Iraq situation won't occur until after Hans Blix's Feb. 14 address before the United Nations, traders were reluctant to buy shares Thursday. A warning from North Korea that it may strike first against U.S. troops in South Korea further crowded Wall Street's already overflowing geopolitical plate.

A weaker-than-expected fourth-quarter productivity report also weighed on sentiment, although the major averages closed off the session's worst levels.

The

Dow Jones Industrial Average

fell 0.7% to 7929.30 after trading as low as 7881.30, while the

S&P 500

fell 0.6% to 838.15 vs. its nadir of 833.25. The

Nasdaq Composite

managed to close fractionally higher at 1301.70 after trading as high as 1310.50 and as low as 1291.50.

Names on the move included

Agilent Technologies

(A) - Get Agilent Technologies, Inc. Report

, which dumped 25% after warning that its results will fall far short of estimates, and

Ericsson

(ERICY)

, which gained 5.1% after naming a new CEO.

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The January retail sales data were mixed, and so were shares in the group.

Gap

(GPS) - Get Gap, Inc. Report

rose 3.7% after posting a 16% rise in January same-store sales, while

Sears

(S) - Get SentinelOne, Inc. Class A Report

shed 8.7% and

Michaels Stores

(MIK) - Get Michaels Companies Inc Report

fell 22% after each reported declining same-store sales. The S&P Retail Index dipped 0.3%.

On the economic front, the government reported that productivity fell 0.2% in the fourth quarter, its first drop since the second quarter of 2001 and vs. estimates for a gain of 0.4%. Total 2002 productivity gains of 4.7% were the largest since 1950, but the disappointing fourth-quarter results hampered stocks and aided Treasuries.

The price of the benchmark 10-year note rose 13/32 to 100 14/32, its yield falling to 3.94%.

In other markets, gold fell 1.7% to $370.70 but -- in a somewhat unusual occurrence -- the dollar fell in concert. The U.S. Dollar Index ended down 0.39 to 99.26.

Inside Baseball

Earlier Thursday, I wrote about

machinations in the options market causing gyrations in the put/call ratio, which ended at 1.35 after trading as high as 2.55. The point of the piece was mainly about how the put/call spike might not be a sign of rising bearishness, but also about how the market has become so dominated by short-term trader types, for a variety of reasons.

"If you are not used to trading successfully in chop like this, then this is simply not your game," Dan Fitzpatrick observed in

RealMoney.com's

Columnist Conversation. "This is a horrible market environment to learn in, and tuition will be steep."

Fitzpatrick observed that the market is "even more difficult" for professionals who have to trade. "They usually can't just sit on their hands, even when the market, and common sense, dictate that they do," he wrote. "But to the average guy who likes to take an occasional position, remember this: Sometimes riding the pine for a while is the best trade."

A lot of folks seemed to be following that advice, as trading volume continued to be modest and was down from Wednesday's levels. In

Big Board

trading, fewer than 1.4 billion shares traded, and declining stocks led advancers by nearly 2 to 1. A little over 1 billion shares traded over the counter, where losers led 3 to 2.

Certainly not all participants are standing pat. Jeffrey Saut, chief equity strategist at Raymond James, bought some shares of the recently beleaguered

El Paso

(EP)

on Thursday.

"At this sort of inflection point is where the risk parameters on the share price is

de minimus

," he said via email. "In a climate where most companies' margins are under pressure, regulated margins might, just might, be a pretty good thing for the envisioned future that I see."

El Paso fell another 18.7% Thursday and was again the Big Board's most actively traded stock. The shares are now down 40% this week after the energy provider slashed its dividend and announced further measures to shore up its dwindling cash reserves.

A purchase like Saut's brings to mind two cliches. From a bearish perspective, just because a stock is down in price doesn't mean it represents value or is "cheap"; El Paso still has $5.04 of downside risk and could very well be headed for bankruptcy. Conversely, usually the best time to buy stock is when you have to hold your nose.

Let's see how this one unfolds.

Inside Baseball, Inning Two

Last night I mentioned the approaching intersection of the Nasdaq's 200-day and 50-day moving averages at about 1400 each, and how technician Rick Berry sees this as a bearish development.

Several readers emailed to protest that view.

The Comp's 200-day moving average hasn't been below the 50-day since March 2002, and "the only possible way the 200-day can now move below the 50-day is by the market rallying," observed Seth Morgulas, portfolio managerat Fanam Capital Management, a New York-based hedge fund. "As the market cratered

last summer, the slope of the 50-day became dramatically negative, but the slope of the 200-day did not drop anywhere near as rapidly, as it is a slower average and cannot."

On the flip side, the slope of the 50-day rose more sharply during the rally from the October lows, although it has more recently started to turn back down again.

Another technician observed similarly, suggesting the 50-day crossing up and above the 200-day is "typically thought of as a bullish trend change."

I ran all this by Berry, whose initial reaction was "We will all find out in the fullness of time," arguing that most past episodes of the 200-day crossing the 50-day occurred in the context of a secular bull market, not its bear counterpart.

Pressed for more than the "it's a bear market" argument, the technician agreed that a bullish intersection occurs "when the 200-day has been flat for a while and the 50-day curls up and breaks through the 200-day on high volume."

However, what we have currently is a sharply descending 200-day poised to break below the 50-day.

Additionally, he expressed more concerned about the Dow's 200-day of 8724 crossing its 50-day at 8459, and/or a similar occurrence by the S&P 500, where corresponding averages are at 928 and 896, respectively.

"We could have a countertrend rally but the bigger picture is

of moving averages trending down and lowering trading ranges," Berry concluded.

Technicians dueling over the meaning of moving averages might be the ultimate in market minutiae, but such is the state of things as traders await clarity on the geopolitical front.

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 invites you to send your feedback to

Aaron L. Task.