Here Are Some Important Levels To Watch
As you know, I have been
less than enthusiastic about the action recently. Maybe the market
put in a near-term low with Friday’s late rally…maybe not. The market, after
all, is oversold. The most important thing to keep your eye on is the leading
stocks of the past few months. Simply put, their action leave a lot to be
desired.
First things first, I believe
any bounce here will be just that, a bounce off of its latest drop. I say this
for several reasons.
Fewer and fewer stocks are trading above their
short-term 50-day averages. Dovetailing with that is the fact that there are
just fewer and fewer charts that are in good shape.
As I said earlier, many leading names in
leading groups such as BIOTECH, TELCOM, WIRELESS, TECHNOLOGY have topped near
term. That’s not to say they don’t get their act together and break out of
secondary bases. I am saying that these stocks will take weeks to repair
themselves. These are the groups that led the market up.
There remains a ridiculous level of
bullishness, speculation and frothiness. I hear almost no one talking about a
potential for a drop.
Lastly, there is a lack of breakouts while my
list of shortable names is picking up.
That all said, here are some important levels
to watch.
So far, the correction for the “market” has
been like others…short in time and percentage. The SOX held its 50-day
average on Friday at 450. That number should be watched closely. The S&P 500
held right at support at 1020…which by no coincidence was its 50-day
average. The Dow held its 50 day at about 9520…and the Russell 2000 is
sitting on its 50-day average right here at about 506. A closing break of
these levels will lead to lower prices. I could talk about more important
support at lower levels but let’s not go there just yet.
Continue to go slow until the market shows its
hand, one way or another. I continue to believe the upside is limited.
Gary Kaltbaum