Critical Levels To Watch In The Indices
On Tuesday, the Nasdaq opened slightly weaker but
immediately reversed and began to rally. However, it found its high fairly
quickly and sold off to make new lows. It found its low by mid-morning and
generally worked its way higher until late in the afternoon. It then sold off
once again. After all was said and done (and in most cases, a lot more is said
than done!), it ended up just about where it started.Â
The good news is, minor
support, circa 1600, continues to hold. The bad news is that it’s only a few
points away.Â
The S&P put in a somewhat similar performance but
managed to close slightly in the plus column. It too continues to hold minor
support.
Looking to the sectors, on the downside, the continued
slide in them semis is cause for concern. The moving averages could “Bow
Tie” here soon. Biotech appears to have temporarily stabilized but still
remains questionable (i.e., could resume its rollover). On the upside, the HMOs and homebuilders showed some
strength and so far, still look like they have the potential to resume their
uptrends out of deep pullbacks. Telecom ended slightly higher and appears to remain in a strong
uptrend.
 So what do we do? The indices are oversold based on short-term average
advance/decline readings, the McClellan Oscillator, and price itself. This
oversold nature combined with the fact that minor support continues to
hold suggests that they still have the potential to resume their uptrend.
However, the Fed’s actions on Tuesday, or more importantly the market’s reactionÂ
to the Fed’s actions, could throw a wrench into this analysis. Therefore, focus
on the long side but continue to stick with those strong sectors who appear to
be stabilizing in deep pullbacks (i.e. are oversold like the market itself) but
keep it light since it could be bumpy.
Looking to potential setups, Healthnet
(
HNT |
Quote |
Chart |
News |
PowerRating), mentioned
recently and in the
aforementioned HMOs, still looks like it has the potential to resume its strong uptrend out of a pullback.
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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