Indices Stalling Out on Return Rally?
Each evening we focus on the most interesting aspects for the upcoming trading day. The comments are based on observations of the nightly updates of the Stocks/Sectors and Market Bias pages. They are provided for educational purposes only and are not intended to be direct trading advice. Also, keep in mind that these remarks are made up to 12 hours in advance of the markets opening. Therefore, overnight events may alter the outcome of these observations.
At the time this is being published, the S&P Globex Futures are trading 2.40 points higher and the bond market is trading up 4 ticks.
Heads up, after the close Yahoo! [YHOO>YHOO] announced earnings lower than the “whisper†number. The stock was down nearly 28 points in early Instinet trading. This will likely weigh heavy on the nets and possibly technology in general tomorrow.
If last week was a correction, then one would expect the indices to have made it back to old highs without stalling out on the return of the bull. Unfortunately, the S&P (a) and NASDAQ both fell short and the Dow appears to be stalling out after making all-time highs just yesterday. Now, I’m not saying to run out and sell everything but it may be time to “pull in your horns†a bit (tighten stops on longs and wait for the market to re-assert itself) and consider some candidates on the short side-especially in light of today’s poor action in the bond market.
Although it failed to break out of a high level triangle decisevely today, Spyglass [SPYG>SPYG], mentioned last night, still looks interesting to me.
Stocks in fast moves often only consolidate for a few days before moving higher. With that said, Pharmaceopeia [PCOP>PCOP], on the Proprietary Momentum List, is in a fast move higher and may just be pausing today. If you’re not a breakout player, watch this one going forward for a pullback. Vishay Intertechnology [VSH>VSH], on the New 60-day Highs on Double Volume List, broke out of a high level wide-and loose base on an expansion of volume today.
On the short side, Pharmacia and Upjohn [PNU>PNU], mentioned last night still looks interesting to me.
Today, I was asked about what types of patterns should be used when shorting stocks. Essentially, anything that works on the buy side (pullbacks, breakouts, fast moves etc…) work on the short side (to quote a friend “If confused, turn the chart upside downâ€). With that said, Ancor Communications [ANCR>ANCR], on the Implosion 10 Technology List and Lucent Technologies [LU>LU], on the Proprietary Implosion List, both look poised to resume their fast moves lower (just the opposite of PCOP above).
Best of luck with your trading on Wednesday!
PS – Reminder: Protective stops on every trade!