Focus On These Types Of Sectors
Looking to the indices, on Thursday, the Nasdaq opened
weaker but quickly found its low and began to rally. It then traded in a
wide-and-loose fashion but did manage to close on its high. This action was
enough to have it closing at new highs for the year.
The S&P put in a somewhat similar performance. This
action keeps it at a new closing high for the year too.
So what do we do? The average advance/decline
numbers have been dropping over the last week. This makes sense when you
consider the fact that the S&P has climbed less than 1%
during that time. This action suggests that there is a bit of a
“rolling” correction occurring in the underlying sectors. On the other
hand (I know you probably are looking for a commentator with only one hand), the market,
especially the Nasdaq, still remains overbought. Further, the VIX is at extremely
low relative levels (I do not use absolute levels). Therefore, continue
to exercise caution on the long side and focus on those strong sectors that appear to
have corrected (i.e. pulled back). Once we have a meaningful correction, we
will then look to get more aggressive.
Looking to potential setups, Ryland Group
(
RYL |
Quote |
Chart |
News |
PowerRating),
in the strong homebuilders (and let’s face it, no one would want to buy a home
from a “weak” homebuilder), looks like it has the potential to resume
its strong uptrend out of a Pullback/TKO.
Best of luck with your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
P.P.S. Learn my best swing
trading strategy in my new interactive CD-ROM. Click
here now for details.