Difficult To Call
On Friday, the Nasdaq opened flat and began to sell off.
However, it found its morning low fairly quickly and began to rally sharply in
early trading. It then chopped back and forth but did manage to close well. This
action puts it back above its 50-day moving average.
The S&P put in a similar performance. This keeps it above
its 50-day moving average.
So what do we do? The market remains difficult to call. If
this rally is for real (either a bear market rally or a bottom), then the
market can get overbought and stay that way for quite a while. Otherwise, it’s
back to the pullback, thrusts, pullback pattern. Therefore, probably the
best course of action is to continue to keep it light while the market finds its
way.
Looking to the sectors, there are some selected
areas are relatively strong: Major drugs are beginning to look constructive as
are some areas health/medical. Selected areas of insurance have also been strong
as of late. Other sectors such as telecom and software may be trying to make a
transition but it’s too early to tell. I’m not sure if the above is enough to
get excited about, but it’s better than what we’ve had in a while.
Looking to potential setups, Eli Lilly
(
LLY |
Quote |
Chart |
News |
PowerRating) in
the aforementioned major drugs (which many will need if this bear market
lingers), looks like it has the potential to resume its uptrend out of a
pullback/Bow Tie. However, don’t overstay your welcome since it has some
longer-term overhead resistance to clear (not shown).
Best of luck with
your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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