A Prime Indicator Of Market Direction
For the past few weeks, I have been patiently
waiting for the day when the market would put in an intermediate
top…meaning something of the 10% variety. I believe the worst correction has
been 5% for the S&P…a wee bit more for the Nasdaq.
My bias is still to believe that at any time, the market could start a
correction uglier than what we have seen. How will I know? In order of
support…Dow 9720,9640,9497…S&P 1043,1035,1018…Nasdaq
1923,1900,1841, the
second number in each being the 50-day average. The 50-day average has held up
like a rock for the past few months. BUT…with so many stocks still in good
shape, I don’t believe there is any chance of a bear market here…just a bigger
correction than what we have had. BUT…CORRECTIONS can be painful if you don’t
take action…and I am seeing enough changes to warrant some action.
So, here are some thoughts.
It “felt” like a major rotation occurred on Thursday and Friday. Rotation
into DEFENSIVE areas like DRUGS and
OIL SERVICES and out of the areas that have
been working. In my last report, I stated that the SEMIS were due to pull back
because of their extended condition. It is now occurring. One only has to look
at charts of the SOX, Applied Materials
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Novellus
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light, they look like they are reverting back to their 50-day average…which
could mean another few percent. This move back towards the 50-day is normal at
this juncture.
BIOTECHS
seem done…except maybe a few names. Look at charts of
Amgen
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and the Biotech
iShares
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Internets also feels toppy.
Amazon
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feels toppy but is staying in a base of six months’ duration.
Brokers
were hammered on Friday…on heavy volume. This bears watching as
BROKERAGE stocks are a prime indicator of market direction.
A ton of secondaries have been hitting the market. Not too many have been
talking about this.
Japan has broke 3-month support. Not sure what this means but it can’t be a
positive.
Continue to go slow. The market has been too choppy lately to play heavily.
Leading stocks are either too extended to play or are breaking support. Patience
is key. In due course, the market will show which leading names will break out
of secondary bases and which ones die on the vine.
Gary Kaltbaum