Keep An Eye On The Sector Action
Looking to the indices, on Wednesday, the Nasdaq opened
firmer but quickly began to sell off. It found its morning low in early trading
and then rallied to tag the psychologically (and technically) important 2000
level. However, it reversed at that level and sold off for the remainder of the
day. This action keeps it stalling at its old highs.
The S&P rallied to make new highs but reversed to close
poorly. So far, it remains above Monday’s breakout levels.
Looking to the sectors, many are stalling at their
old highs (i.e. potential multiple tops). This includes (but not limited to): semis, retail, software (some
sub-sectors are already headed lower), computer hardware (similar to
software), Internet, and selected telecom. On the upside, many sectors still
remain in uptrends, hovering at or near 52-week highs. This includes (but not
limited to): homebuilders (and most other materials & construction),
chemicals, gold, metals & mining, insurance, tobacco, manufacturing, foods,
health services, selected energy, banking (most areas), consumer non-durables,
gaming and telecom-wireless.
So what do we do? I’m concerned about the number of sectors that are stalling
below multiple tops/at their old highs. And, of course, I’m also concerned about
similar action in the Nasdaq itself. Therefore, you might want to sit on your
hands on the long side and take a “show me” approach–simply waiting
for entries might accomplish this task. Further, you probably want to stick with
the strongest sectors that have recently corrected such as health services. On
the short side, for the aggressive, you might want to start putting together a
list of stocks in those sectors mentioned above such as retail that could be
trying to make a transition lower.
Looking to potential setups, Arthrocare
(
ARTC |
Quote |
Chart |
News |
PowerRating), in the
aforementioned health services sub-sector, looks like it has the potential to
resume its uptrend out of its first pullback since its recent breakout.
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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