Why I Think We Are In Correction Mode
Looking to the indices, on Wednesday, the Nasdaq gapped
sharply higher on the euphoria of the Intel news but immediately found its
high
and began to sell off. It found its low in early trading and began to drift
higher into mid-day. However, the selling resumed late in the day. This
action
has it closing poorly and in the minus column.
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The S&P put in a somewhat similar performance. This
action keeps it at new highs for the year too.
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So what do we do? On Wednesday, the market did
a classic good-news reversal. As you know, this type of action is usually
indicative of an “exhaustion” type move as the Johnny-Come-Latelys
pile into the market. Further, the hate mails* continue to pour in. This
included one that told me to go do something to myself, that quite frankly,
if I
could do, I would be in an entirely different profession altogether.
The type of
complacency usually occurs before a market correction. Therefore, I’m going
to
be wrong again and say that that the market is in correction mode. On the
short
side, continue to look for shorting opportunities in the index shares but
use
caution should they gap sharply lower on the late-breaking earnings
announcement
from IBM.
On the long side, start putting together a list of
stocks in strong uptrends that are beginning to correct with the rest of the
market. See last
night’s column for a list of sectors that are at or near 52-week highs.
No setups tonight. Now that the market appears to be
correcting, we should see plenty of longs setting up very soon.
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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trading strategy in my new interactive CD-ROM.
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*Because I have been calling for a
correction.