A Tricky Environment
The market is up to tricks
this Halloween!Â
Ever since the market posted a fourth distribution day, it has been
directionless. Throughout the
days, it has wandered between positive and negative and volume has wavered
between heavy and light. Obviously,
this is very difficult action to make any conclusions from, so it’s
important to follow what the market has already told us through four solid days
of distribution: Hold off any new
purchases until another confirmed rally.
  
Stocks are not setting up
en masse and recent breakouts
have not yielded any worthwhile gains. This
market has a bit of work to do before it proves to us that it is worth
investing in. Following the
market’s distribution, the Dow produced its first day of a new possible rally
on the 10/29 reversal. The
S&P 500 and Nasdaq began a new rally yesterday, 10/30. In order to pursue individual stocks once again, I would need to see
another gain of at least 2% on heavier trade than the previous day. The earliest I would be looking for this would be tomorrow on the Dow
or Monday on the S&P 500 and Nasdaq.
If this market can find firm footing in the days ahead,
some of the following sectors have been showing the best strength: Computers,
Medical, Leisure and even some Telecom. Many
of the stocks in these groups have some work to do before they are able to
produce a setup we can take advantage of.Â
For example, Vimpel Communications
(
VIP |
Quote |
Chart |
News |
PowerRating) and Mobile Telesystems
(
MBT |
Quote |
Chart |
News |
PowerRating)
both need to work through the right sides of their multi-month bases before
they can offer a solid entry point.
The market may eventually firm up, but that will only be
one piece of the puzzle before we are given a high probability to make money.
It will require solid companies ready to break out of sound base
structures, and that is just not appearing quite yet. So for the time being, the sidelines are looking like a cozy place to
be, while the focus should lie in preserving capital rather than trying to make
money in a tricky environment.
Have a Happy Halloween!
Â