A Dozen Sectors That Could Be In Trouble
Looking to the indices, on Friday, the Nasdaq opened firmer
but quickly began to sell off. It found its morning low fairly early and then chopped
back and forth for the remainder of the day. Â
This action keeps it below its recent trading range and below its 50-day moving average. It
still looks like a top may be forming here.Â
The S&P was also choppy but did manage to close in the
plus column.
It remains below its recent trading
range (overhead resistance) and below its 50-day moving average.  The
“Bow Tie” moving averages (i.e.10 simple, 20 exponential and 30
exponential) have all turned down here (not shown).Â
The real story continues to be in the sectors. Many appear
to have formed tops. These include (but not limited to) biotech, homebuilders, Internet,
HMOs, selected insurance, computer hardware, software, and selected telecom. The
semis, being the debacle de jour (led by Nvidia
(
NVDA |
Quote |
Chart |
News |
PowerRating)) have now joined in
the fray. Selected sub-sectors here were hit especially hard. Other areas
such as utilities and major drugs remain in bona fide downtrends.
So what do we do? Tonight’s (Friday) game
plan was pretty easy to write. I simply cut and pasted last night’s commentary: I remain concerned about the
indices. Should the rally return, they will have to work their way through
overhead resistance. Further, I’m also concerned about the number of sectors
that are in either bona fide downtrends or that have recently formed tops. And
lastly, tonight, after flipping through hundreds of charts over and
over again, I was unable to find any meaningful longs. Therefore, if I had to
pick a direction, I still think the short side might offer the best
opportunities. However, you might want to wait for a more decisive break lower
in the indices before getting too aggressive.
Looking to potential setups, on the short side,
Mid-Atlantic Heath Services
(
MME |
Quote |
Chart |
News |
PowerRating), in the weak HMOs, looks poised to resume
its meltdown out of a First Thrust pattern (email me if you need the rules).
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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