Go Slow!
The markets
spent the week doing what they should be doing at important
resistance levels: Backing up! The best part about last week is that it gives us
the ability to see definable support-and-resistance levels that enable you to
become more emboldened on a breakout, and more cautious on a breakdown.
On the upside, near-term resistance lies at 1800 Nasdaq, 1100 S&P 500 and at
9600 Dow. Keep in mind, there is still a ton of resistance all the way up.
Technology does remain the place to be, as money continues to flow there.
On the other hand, support can be found at 1680 Nasdaq near-term and farther
down at 1620. The S&P 500 support lies at 1053, and Dow support lies at 9200
and farther down — and more importantly — at 9000. If at any time these major
indices break these levels…probably smart to get out of the way.
With the Fed cutting for the tenth time this week,
you can probably expect more upside testing. But if
this is a bear market rally…and I do believe it is…go slow! Bear market
rallies last up to eight weeks and we are now starting Number 7. When they end,
enormous damage is inflicted. But right now, this second, things
seem OK.
So, continue to watch Technology. It will tell a
huge tale going forward. The main problem for the intermediate player is that
the strongest moves are stocks that went from $100 to $10 and are rallying to
$15. You get the hint. Bear market rallies usually lift the laggards best.
That’s why there continues to be a lack of quality breakouts to yearly highs.
Sure, there are a few but…not many.
The other problem I see is that vicious rotations continue. Leading Medicals
have been dusted in the past few weeks. These stocks had the best technicals.
Failed breakouts worry me. Sectors that can be exploited…and that have good-looking
charts are defensive recession-resistant areas
like Foods and Beverages.
Boring, but good-looking nonetheless. Recent breakouts can be found in
(
GIS |
Quote |
Chart |
News |
PowerRating)
and
(
WWY |
Quote |
Chart |
News |
PowerRating). Most other sectors are moving into resistance areas.
