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It's not easy watching carnage, even when it's pretty much what you were expecting.

And it's not easy buying when you've taken a licking in your portfolio. But I think that's exactly what investors ought to be doing over the next few days.

In my Feb. 4 column,

Finding the Upside in an Up-and-Down Market, I projected that the period of March 1 through March 21 would show wild volatility and, finally, a decline in prices as we got close to the March 21 meeting of the Federal Reserve. I advised raising some cash -- especially from technology stocks -- in the rally that I thought we'd get in the last half of February. And that's pretty much what I did in

Jubak's Picks, selling positions to bring my cash up to about 20% from zero.

Now it's time to execute the second half of that strategy. It's too early to know for certain that Thursday's rally marked the end of the correction. And I don't know what the


will do on Tuesday, although I think the odds favor a 25-basis-point increase in interest rates. But I believe that the market will rally after the meeting. And, as I wrote in that same February column, I think the rally could stretch into early May. So now's the time to put some of that cash to work.

Hard to Jump Into the Battle

As much as I believe in that strategy, however, I know it's been hard to execute lately. It's tough to pull the trigger and buy when stocks are falling by $10 or $25 a share in a day. On Wednesday, the Nasdaq Combined Composite Index closed at 4,598, down just about 9% from the record close on March 10. That was close to the definition of a correction, which is a decline of 10% to 15%. But corrections never treat all stocks with equal justice, and this one is taking a huge bite out of some of the stocks that led this market higher. For example, at Wednesday's close,

Applied Micro Circuits


was down $63 a share from the March 10 close,



down $44,



down $53,

Network Appliance

(NTAP) - Get Report

down $63 and

Texas Instruments

(TXN) - Get Report

down $32. No matter that all of these stocks were still way up for the year. I know on Wednesday, as I watched

RF Micro Devices


fall almost $30 a share, my impulse was to run for the hills. Declines of that magnitude don't make anybody want to put more money into the market -- it just seems to be asking for trouble.

It's not just the immediate punishment that weighs on an investor's spirits, either. Every day, after the market closes, the airwaves and the chats are full of second-guessing and a diet of "I told you so." Depending on what happens today, I could even see that message reach its highest volume this weekend in the financial sections of the Sunday newspapers. A few columnists might even say that the "bubble" has popped.

At times like these, I find it helpful to review why I believe what I believe about the market. It's always good to double-check the assumptions behind any strategy, of course, but it's also useful to remind yourself that your strategy is built on logic and facts.

Nasdaq Was Due for a Break

For example, it's good to remember that the charts were clearly calling for some kind of retrenchment even as the Nasdaq hit a high on March 13. Momentum had been slowing as the market approached 5,000, and the index clearly struggled to get through this level. To break solidly above 5,000 and move up from there, the Nasdaq needed to take a breather. A breather, however, wouldn't upset the long-term trend, which still solidly points upward.

That upward trend is supported by both money flow and fundamentals for the quarter that ends with March.

The logic of money flow works like this, in my opinion. With the end of the quarter drawing near, with potentially market-moving news on inflation yesterday and today (with release of the

Producer Price Index

and the

Consumer Price Index

), and news on interest rates due from the Fed on March 21, any investor up for the quarter would be inclined to take profit in technology stocks. Money would flow out of the sector on any provocation.

Money Will Head Back to High Tech

After March 21, though, I think the logic of money flow works in the other direction. A 10% correction will have taken the price risk out of many of the technology stocks, and some of them will actually seem cheap. The Fed meeting, whatever its result, will be in the past, and the central bankers aren't scheduled to meet again until May 16. Add in the inevitable end-of-the-quarter window dressing, as professional money managers stock up on the best-performing names of the quarter to impress clients, and I think money should move strongly back into technology stocks.

I'm sure that some technology companies will miss earnings during April's financial reporting season. Some companies always do. But on the whole, the quarter is shaping up as one in which a significant number of companies report record revenue and profit. Traditionally, the quarter shows seasonal strength for many technology companies, and this year, the period is shaping up as even stronger than the seasonal trend suggests.

Market-research firms are reporting that demand for gear used in fiber optics, telecommunications, wireless, broadband and chip making is running ahead of even their last rosy projections. When they reported their fourth-quarter earnings, many technology companies raised their near-term growth rate projections and told analysts that orders had climbed to record levels. That growth is going to seem especially attractive given that growth at the traditional blue chips is still constrained by a lack of pricing power and declining margins.

In other words, I think the argument for buying technology stocks on this decline is pretty compelling.

I don't pretend to be able to call the exact bottom, although my best estimate is that it will fall sometime between Thursday's Nasdaq low point and the day the Fed meets, March 21. The bottom could come before the Fed meeting if investors decide to anticipate nothing worse than a 25-basis-point hike in interest rates. It could come after the meeting -- and we could see a couple more rough days next week -- if

Alan Greenspan

and crew decide to whack the economy hard with a 50-basis-point increase.

In any case, I don't think it's too early to start buying now, especially if you begin by buying partial positions in the stocks you'd like to own and add more if the market drops further. Please use your own best judgment in timing these buys -- in this column, with its lead time of a day or so, I can't possibly be as attuned to hourly price movements as an investor working with real-time prices or even with 20-minute delayed prices.

Some Leaders to Consider

What would I be buying here? Well, some of the stocks already in Jubak's Picks have tumbled to good entry points. In particular, I'd take a look at



, RF Micro Devices,

LSI Logic

(LSI) - Get Report


National Semiconductor


and my most recent pick,

Mercury Interactive


. In my personal account, I've opened positions in Mercury Interactive and LSI Logic this week and added to my holdings of National Semiconductor.

Outside Jubak's Picks, I'd begin with the 10-stock watch list that I wrapped up in my Feb. 15 column. None of these has quite dropped to a buy target I calculated in February -- not surprising, given the huge run that some of them have enjoyed for the last month or so -- but some are getting to interesting levels. I'd consider buying

ARM Holdings



GlobeSpan Semiconductor



JDS Uniphase


or PMC-Sierra at these levels. Today, I'm going to grab just one of this group -- PMC-Sierra, even though it's still almost $100 above my target. The stock has been so strong over the last month, and the fundamentals look so good, that I think the stock will be among those that bounce back most quickly after this correction. I'm adding PMC-Sierra to Jubak's Picks with this column. I'll revisit the others in this group in Tuesday's column.

This correction has cut such a wide swath through the technology sector, however, that I don't want to just limit my hunting to that list. Among the stocks that I think are now trading at attractive prices are

Conexant Systems

(CNXT) - Get Report

, Network Appliance,

Siebel Systems


and Texas Instruments. I'm also going to add Texas Instruments to Jubak's Picks with this column.

Jim Jubak is senior markets editor for MSN MoneyCentral. At time of publication, he was long Broadcom, E*Trade Group, JDS Uniphase, LSI Logic, Mercury Interactive, National Semiconductor, Network Appliance, Nortel Networks, PMC-Sierra, RF Micro Devices, SDL, Siebel Systems and Texas Instruments, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Jubak welcomes your feedback at

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