It's make-or-break time for the Nasdaq Composite I:IXIC this week, according to veteran technical analysts, as the technology-heavy index has pushed up from its September lows to within striking distance of its 50-day moving average at 1759.

The index has made this trek twice in the past year, but both visits have ended with tears for bulls. The first came in January, when it nudged just slightly over its average level of the prior 50 days -- an important level of resistance, according to technical analysts -- only to fall back sharply below it in early February. The second came in mid-April, when the move lasted a little longer -- until mid-June. The collapse of both attempts signaled prolonged declines.

There's no sense in declaring a definitive bottom for Nasdaq stocks, therefore, until the index crosses above this level and bulls make it stick for more than a few days. It's tempting for pundits at brokerages and in the media to try to call a bottom in the market early, just so they can have bragging rights. But for ordinary investors who have been husbanding cash, it's probably better to be late and safe than early and sorry.

In the second edition of my book,

Online Investing

, which was published in February, I noted that whenever the Nasdaq Composite broke definitively above its 50-day moving average in the past, a safe phase for technology-focused momentum stocks began. For growth investors seeking a more certain all-clear sign, I noted that a cross of the Nasdaq's 15-day moving average over its 50-day moving average -- something that typically occurs a few days later -- had served well in the past. (For those who wish to get a jump on this idea, you can use a shorter time period, e.g., the 10-day moving average crossing over the 40-day, or the eight-day crossing over the 33-day, for that matter. The only one I've tested is 15 over 50.)

Short-Term Trades

One technical analyst who isn't waiting for any more signs to declare that the bear market has ended is Ed Nicoski, chief quantitative analyst at U.S. Bancorp Piper Jaffray in Minneapolis for the past 25 years. Using a newly popular term of art, he says he's "constructive" on the market, recommending that investors whittle their cash position down to 6% from his summer high of 15%.

"The end of September looked like a capitulation similar to major climactic lows in the past, like 1998, 1990 and 1987," he said in an interview last week. "It looked like a parabolic curve going down that was a reverse of the parabolic curve going up. In that kind of environment, a free fall, we believed that the market would make a test of its immediate previous climactic low, which was in the fall of 1998."

Nicoski, who has called the market well from his vantage in the North Country, has been right so far: The Nasdaq Composite low in 1998 came on a spike down on Oct. 8 at 1357. The low in this round came on a spike down on Sept. 21 at 1387. Close enough, he says. (The 15/50 crossover in 1998 occurred three weeks later, on Oct. 21, and wasn't reversed for the next 18 months.)

Before telling you the analyst's forecast for the next six months, let me review some important insights he offered the last time we spoke, in August 2000.

Past Wisdom

Beware of putting too much stock into can't-miss stories. He notes that many of the companies believed to have the best fundamental stories in 1972 took a decade to recover their values. He thinks that history will repeat and many people will be surprised to discover that many of the best-regarded large companies of the late 1990s will never recover their all-time high values.

Pay attention to sectors and relative strength. He says that even as tech stocks languished in a bear market from 1969 to 1974, other groups such as energy surged to new highs. In the 1980s, he recalls, the high relative-strength stocks were foods and drugs. In the 1990s, it was back to technology. Buy sector strength and sell sector weakness, he says, and you will seldom go wrong.

Pay attention to bases and breakouts. He believes that great stocks pass through a cycle of infamy and redemption, and that investors must patiently wait for ruined names to build long, sold bases. First in the cycle comes "annihilation," when a stock gets killed after a series of poor earnings reports or product failures. Then comes "oversold," when a stock sinks to 12-month lows. Next is "consolidation," when the stock moves sideways in a trading range at some logical level of support for six to 24 months. And last comes "re-emergence," when the stock's relative strength vs. the market improves even though the price appears to be mostly flat.

Beware of fake-outs. He cautions against getting involved in a consolidating stock until it definitively violates its multiyear downtrend -- e.g., its 200-day moving average. A lot of false moves are what building a base is all about. The list of stocks Nicoski offered in August 2000 to illustrate these concepts performed splendidly, validating his point of view that the specialty education, thrift and specialty drug stocks would outperform.

The 15 names rose 23% from last Aug. 1, 2000, through Oct. 12, 2001, vs. an

S&P 500

decline of 24% and a Nasdaq Composite decline of 54% -- led by

Tenet Healthcare

(THC) - Get Report

, up 93%;

Career Education

(CECO) - Get Report

, up 88%; and

Apollo

(APOL)

, up 82%;

Washington Mutual

(WM) - Get Report

, up 63%; and

Barr Laboratories

(BRL)

, up 55%.

Now

So what about now? Nicoski believes technology stocks are in the process of ending their bear market, but will not enter a new bull market for "a number of years." However -- and this is a big however -- he thinks you can buy the old tech favorites that are down at least 80% this year and trading between $3 and $10 for a two-month trade.

In effect, he thinks the venerable "January effect" will manifest itself early, a situation in which stocks sold hard for tax reasons can be bought by risk-taking speculators for a sizable bounce.

For a longer-term purchase, Nicoski believes Old Economy technology stocks -- e.g., semiconductor capital equipment makers such as

Applied Materials

(AMAT) - Get Report

and

Novellus

(NVLS)

-- are the way to go. He would hold defense contractors such as

General Dynamics

(GD) - Get Report

, but not buy more because of their "good pops" in the past year. He still likes the small- and mid-cap banks and thrifts.

Nicoski is constructive (there's that word again) on the wireless service providers like

Sprint PCS

(PCS)

. He's bullish on secondary health care stocks and the strongest biotech stories. He believes defensive issues like tobacco or soft drinks will blow smoke and tread water. And the analyst thinks it's time to rotate out of the strong pharmacy benefit and hospital stocks.

The only group Nicoski likes without a caveat, for investors with at least an 18-month return horizon, is energy -- particularly Canadian oil and gas drillers. Buy a few Canadian drillers and "put them away for awhile," he says because he believes much higher natural gas prices are in the forecast.

Some names are

Imperial Oil

(IMO) - Get Report

,

Suncor Energy

(SU) - Get Report

and

Alberta Energy

(AOG)

.

I'll watch all of these and report back in a few months.

At the time of publication, Jon Markman owned or controlled shares in none of the equities mentioned in this column.

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