Well, the players in this "mule market" I talked about

last week are still nervous, waiting to see who will make the first move. The

Nasdaq

opened last week at a high of 3765, dipped to a low of 3367 on Wednesday and finished Friday at 3529. This represented a 453-point drop from the high of 3982 the previous week.

The week was marked by more selling than I anticipated as the Nasdaq revisited the lows of April, which tells me that we have many more momentum players still playing the market than I counted on. Even the slow investing of institutions could not stem the tide as the rats jumped a slowly sinking ship. This was rather eye-opening as I was expecting the Nasdaq to bottom sooner and begin another slow rise to 4000, but our market continues to see wild selling with good companies. I guess I had better dust off that crystal ball a bit.

Momentum trading last week was tough on the inexperienced trader, who was better off watching from the sidelines. The market traded in spurts, producing quick, multiple bottoms making entries and exit points difficult to identify and play. Scalping -- going after one-eighth or one-sixteenth-point gains -- was the play of choice for most traders who participated, but I tend to shy away from that method of trading.

This nervousness was reflected in the fact that leaders like

Cisco

(CSCO) - Get Report

and

Applied Materials

(AMAT) - Get Report

showed fairly good earnings but were punished with impunity.

Last Wednesday was a day that reminded me of playing on my teeter-totter in the third grade. In fact, the trading reminded me of 13-year-old kids playing at trading, which really makes me think we have a surplus of online traders left over in this market. The day was mostly selling until we got into the afternoon and saw big waves of buying met by selling, then buying, then selling again like the War Between the States.

The increased movement invoked what I call the "time and movement" law of momentum, which means that the largest move in the shortest amount of time creates the most predictable plays. This had me on alert Wednesday for determined buying, which occurred late in the day. This teeter-totter action, along with three consecutive days of nervous selling is indicative of a market change in light of the

Fed

meeting. Three days of down action meant we were likely to see some buying as sellers seemed to be wearing out in the face of institutional interest in leader stocks. You can almost track the whole institutional action by watching Cisco, even though we had a bit of negative momentum provided by

Barron's

as they rehashed old points about Cisco being overvalued.

I again saw the war between buyers and sellers occur on Thursday morning, but the buyers won out and our leaders took control of the market. I was watching such stocks as

Oracle

(ORCL) - Get Report

,

Rambus

(RMBS) - Get Report

,

Intel

(INTC) - Get Report

,

eBay

(EBAY) - Get Report

,

JDS Uniphase

(JDSU)

and Applied Materials, which always seem to attract the institutions.

We have been testing April's lows, and I am expecting the selling to end before the Fed meets on Tuesday. Once we get these nervous characters out of the way, we should be on our way to a nice slow climb as institutions begin shopping in the debris field left by the sloppy trading.

I will be looking for leadership in defensive stocks such as utilities and gold or other sectors if traders are indeed turning into scaredy cats. I also intend to follow the money wherever it goes as the market keeps raising cash and selling good companies. If the Fed raises interests rates beyond what is expected (one-quarter to one-half point), I will be looking for momentum in any corner I may find it. I doubt it will, as the Fed does not want to be the instrument that will cause the market to drop any further. If interest rates are raised only a quarter point, it may be the rock to get the mules moving again.

We should see some profit-taking as we climb, but this huge selling should wane as we lose our nervous little friends and allow the institutional giants to make their way through the streets of New York. At least for now, it seems the Nasdaq is back on track to climb again to 4000 and possibly beyond. If for some reason the Nasdaq dips to 3000, look out below. But, you know what they say about those who try to predict the market . . . That's the beauty of momentum traders: We play whatever the market offers, not what we think the market will do days down the road.

Ken Wolff is founder and chief executive officer of Paradise, Calif.-based MTrader.com, a daytrading and swingtrading Web site. This column provides general information about momentum trading. TheStreet.com has no affiliation with MTrader.com, and no endorsement of MTrader.com or momentum trading is intended. While Wolff cannot provide investment advice or recommendations here, he invites your feedback at

ken@mtrader.com.