Corrective Phase
On Monday, the Nasdaq gapped higher but quickly found its
high and sold off. It then reversed and worked its way higher throughout
mid-day but resumed its sell off going into the close. This action has it
stalling out near multi-month highs and closing poorly.
The S&P also turned back down. This action suggests
that it may be returning to trading range mode.
The VIX hit multi-month lows and began to reverse from a
“stretched” condition (from the 10-day moving average). This action
sets off a plethora of CVR sell signals.
So what do we do? The fact that the Nasdaq failed to break
through, combined with negative action in the S&P and a reversing VIX, suggests
that we are entering a corrective phase. Therefore, avoid the long side and
continue to look for shorting opportunities in weaker sectors (e.g., HMOs).
Looking to potential setups, hospitals still
look poised to resume their meltdown. With that said and at the risk of boring
you to death, Community Health Systems
(
CYH |
Quote |
Chart |
News |
PowerRating),
mentioned forever, still looks like it has the potential to resume its
downtrend out of a pullback.
Best of luck with
your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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