Remember That One Thing?
On Tuesday, the Nasdaq opened firmer but quickly found its
high and sold off hard for a solid trend day lower. This action has it stalling
below its 2100 resistance level, has it closing poorly, breaks it out of its
short-term trading range, and has it nearing the 50-day moving average.
The S&P put in a similar performance. This action
has it stalling after recently testing overhead resistance and the .786 retracement level of its last leg down. It also breaks it out of its recent
trading range and puts it below its 50-day moving average.
The Dow Jones Industrials also are stalling short of
overhead resistance and the .786 retracement of their last leg down.
Tuesday’s selling was broadly based. In fact, out of the
239 sectors/sub-sectors that I follow, only 3 ended higher (and not by much).
This action puts sectors such as retail back into the questionable (at best) category.
Interest-rate-sensitive stocks such as homebuilders, real estate, and the banks
continued to implode. And now, broker/dealer appears to have joined into the
fray–it was hit especially hard. Gold was decimated, as was silver. In fact,
most other metals & mining stocks were hit pretty hard and now also look
questionable too. On the bright side, pockets of technology such as selected
semis and software held up fairly well. Also, Tuesday’s action gives many recent
high flyers such as Internet a much needed break (i.e., correction/TKO).
^next^
So what do we do? The action in the
indices is disappointing. It gives credence to the resistance levels that I have
been mentioning recently. Therefore, you might want to sit on your hands on
the long side or stick with more volatile issues in strongest sectors that have begun to
correct (e.g., Internet). However, make sure you wait for either
entries or some signs of strength (e.g., an opening gap reversal, a break out of
the opening range, etc…). On the short side, since interest-rate-sensitive
stocks are so oversold, you might want to wait for a bounce before looking to
position here.
As far as setups, Findwhat.Com
(
FWHT |
Quote |
Chart |
News |
PowerRating), in the
aforementioned strong (but correcting) Internet sector, looks like it has the potential
to resume its recent melt up out of a Trend Knockout (TKO). Use caution though,
since this one can be a little squirrelly.
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
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