This Sector Still Looks Great In Spite Of The Market

On Thursday, the Nasdaq opened soft but soon began to
rally. Then after a sharp pullback, it began to rally again. However, it found its high around mid-day and sold off hard for the remainder of
the day, accelerating going into the close.

This action has it closing poorly and continues to
suggests, at least for now, that a top is in place here. The 200-day
moving average, circa 1850, which also corresponds with a support level, could be the next
stop here.

The S&P traded mostly sideways before selling off hard
(harder than the Nasdaq!) going into the close.

This action has it closing poorly and puts it further below
overhead resistance. The 200-day moving average could be the next stop
here too.

The Dow continued to melt down. This action has it losing
over 400 points in last 4-days.

This action keeps it below a wall of overhead resistance.

So what do we do? On Thursday, we had more ugliness.
Of course, you don’t need me to tell you that. About the only two areas that
still look like they have potential are restaurants and the homebuilders.
Look for buying opportunities in those areas but use caution in the homebuilders
since the (recent) volatility in bonds will likely hold them hostage. For the
nimble, look for a contra-trend trade the index shares if they gap
sharply lower on Friday and then show early signs of reversing. On the short
side, do not try to enter this oversold market–wait for a pullback. I can
assure you that we see a plethora of shorts setting up on the first bounce.

Standard Pacific
(
SPF |
Quote |
Chart |
News |
PowerRating)
, in the strong homebuilders (and
let’s face it, who buy a home from a weak homebuilder?), looks poised to resume
its uptrend out of its first pullback after breaking out of a base.

Best of luck with your trading on Friday!

Dave Landry

dave@davelandry.com

P.S. Reminder: Protective stops on every trade!

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