Don’t Shoot Me, I’m Just The Messenger
On Tuesday, the Nasdaq traded mostly sideways ahead of
the Fed. Then, after attempting to rally, it sold off hard. This action has it
closing poorly, it puts it below its 200-day moving average, and it puts it at new lows for
the year. It also keeps it below a tremendous amount of overhead
resistance (the trading range illustrated below between the blue lines).
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The S&P sold off especially hard. Â
The sector action remains poor. Most of tech, like the
Nasdaq itself, is breaking down out of a sideways trading range. Software (see
below) does a good job of illustrating this point. Outside of tech, the
financials are either topping (e.g. broker/dealer) or remain in strong
downtrends (e.g. banks). Retail is breaking down out of its sideways trading range.
What about the leaders? Well, as mentioned recently, (now prior) leaders
such as commodity related stocks continue to appear to be forming a transition
lower (i.e. rolling over). This includes the energies and metals & mining
(including gold and silver). Other previously strong areas such as the
homebuilders have also rolled over as of late.Â
So what do we do? I’m sorry to be so filled
with so much doom and gloom. Remember, I’m just the messenger. If you like, I
can turn my charts upside down and talk about how great they look. Hmm, maybe
I’ll do that later this week. About the
only good thing I can say is that the markets are now really oversold and due
for a bounce. However, as mentioned recently, this, in and of itself, isn’t
reason enough to run out and buy individual issues. Therefore, for the nimble
trader, look to play this bounce in the index shares but wait for signs of
strength (e.g. an entry). On the short side, since the market remains due
to
bounce, you might want to stick with those issues that can trade independently of
the indices (e.g. commodity related stocks). And, wait for a bounce before looking
to establish other positions.
No setups tonight.
Best of luck with your trading on Wednesday!Â
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.
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