Bungee Jump: That’s How I’d Describe These 2 Sectors

 

Elliot Spitzer…If you own INSURANCE or HMO stocks, you probably don’t
want to hear his name. I am in between on the subject. On the one end, I would
love all conflicts of interest, all crime and all ethically challenged people
drummed out of the business world. No doubt, Elliot Spitzer is doing the job
and sending the right message. If you commit the crime, you are going to pay.
On the other hand, where does this end? How far do you go before you destroy
great businesses? Do you destroy a business for the actions of a few? I
believe that was done to a pretty big accounting firm a few years back. How
much investor wealth gets destroyed? I just think that maybe, just maybe, this
could be handled a little bit differently. It is now to the point where even
the rumor of an investigation will bring a stock down. There is no doubt in my
mind that you are now going to get a lot of the “Spitzer effect.” You are
going to see some unethical short sellers plant rumors of investigations just
to get a stock moving lower.

 

The only way to look at this market is to tear it apart and look in-depth.

 

INSURANCE and HMOs-The only way to describe it is by using two words: bungee
jump. I am a technician but I certainly know when to factor in outside
influences. Where they stop? I have no clue. How it ends? I have no clue. I
would just make sure you are on serious doses of Prozac if you decide to play.
ANALysts are already out defending everything in site. Pay attention to the
stocks…not the ANALysts.

 

FINANCIALS- I have three pictures for you. Take a gander.

^next^

 

All three of these charts are taking on an ominous tone. I believe it to be a
distinct negative when FINANCIALS are gagging. There are many other names that
look like this.

 

COMMODITIES- Last week, I told you that COMMODITIES topped. nothing I have
seen so far changes my mind. In fact, Tuesday’s action only confirms my
feelings. Take a look at two pictures:

NUE and PD are two proxies that I follow. As you can see, they have topped
and are now following through to the downside. Please notice that volume is
heavy. These stocks had become very over-owned and when things go south, they
go south quickly as momentum players do not hesitate. COMMODITIY STOCKS have
led the market all year. If they are not leading anymore, what is going to
pick up the slack?

 

OILS-I included OILS in my topping out category last week…and so far, so
good. BUT…I do believe OILS will hold up better than the base metals. I
would not be a buyer though.

 

The DOW- With names like MRK, PFE, KO and GM, I continue to believe the
DOW will lag any up move the market may have. Speaking of GM, let’s look at
two charts of the AUTOS.

Both GM and F have broken very important support. Frankly, I don’t even
believe they are AUTO stocks any more as they make most of their money in
their finance divisions. 

 

The S&P 500-A break below 1101 could lead us down to the August lows. I would
say the S&P needs to put in a goal-line stand…and soon.

 

Have I thrilled you yet? Sorry! It’s just my job to tell you the tale of the
tape. I will simply go back to what I told you in late January and have been
harping on for quite a while…This is going to remain a very tough and
challenging market to play. Even if the market broke out of this range to the
upside, fewer and fewer stocks are participating. This  is a classic sign of
late inning action. At this point in time, we now get to start worrying about
whether important support will hold. The nauseating range continues.