What Concerns Me About Friday’s Rally
Looking to the indices, on Friday, the Nasdaq gapped open
on a better-than-expected jobs report. Then after trading back and forth, it
began to rally in early morning trading. It found its high late in the day and
then began to sell off. This action has it bumping up against resistance, circa
1900.
The S&P also put in a somewhat similar performance but
was much weaker late in the day.
I find it interesting that it closed right at the .786 retracement (see
last night’s commentary). I’ll check with Derrik (of Fibonacci For The Active
Trader fame) to see if this is of any significance.
Looking to the sectors, as one would expect, there were
quite a few impressive moves, especially in technology. However, many
stalled out after trading higher. This included (but not limited to) major drugs
(and other areas of drugs), biotech, conglomerates, financial services, leisure,
health services, retail, insurance, defense, and gold.
So what do we do? Make no bones about it,
Friday’s rally, especially in the Nasdaq, was impressive. However, it does
leave the indices at an interesting juncture. This is especially true in the
S&P which stalled after hitting its old highs. As far as setups, my database
continues to generate an overwhelming number of potential shorts vs. longs. Fortunately,
very few have been triggering lately. Since I’m a trend trader, I don’t want to
fight the tape for the sake of fighting it. Therefore, look to nibble on the
short side but only if you see signs of the market, sector, and individual
stocks trading lower. Once
again, on the long side, if you played the bounce from the timing
signals (or bought index shares as a hedge against shorts), you might want
to continue to scale out and trail a stop higher. Before looking to play
individual issues, wait to see if the indices can breakout to new highs and hold
there.
Looking to potential setups, once again, L-3 Communications
(
LLL |
Quote |
Chart |
News |
PowerRating),
mentioned recently and in the weak defense sector, still looks poised to resume its recent meltdown out of a pullback.
And, once again, Northrop Grumman
(
NOC |
Quote |
Chart |
News |
PowerRating), also mentioned recently and also in
the weak defense sector, still looks poised to resume its meltdown out of a
pullback.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….your book is like an investing bible to me, and I thank you very much for writing in a simple straight forward style that even a novice like me can use….”
Thanks Much,
Cliff A.
