How To Time A Potential Pullback Today
Last Years Hot Sectors, This
Years Dogs?
At first blush this
appears to be the case. I remember my first job out of college,
answering phones for a mutual fund company in Boston talking about the virtues
of mutual fund investing. What I never had realized was how many people chased
performance. Money Magazines top performers for 1991 were undoubtedly the ones
that received the most inquires. These funds typically did lousy the following
year. The sheep mentality will always be alive and well.
With that in mind, I am beginning to see the
early signs that it may be happening yet again. Readers know I have been very
keen on the gold mining stocks for the last 8 months or so. Trading and
investing in them as been very lucrative. However, just yesterday I was
watching Neil Cavuto on Fox (I love his show), and one of his correspondents was
waving the pom poms on gold stocks. She was rattling off all the reasons gold
should continue higher, budget deficits, weak dollar etc etc, as if this was
some new revelation.
So while I agree with her 100%, I just have this
feeling that it may be time for the sector to take a break. I will by no means
throw in the towel, but maybe some weak hands need to be shown the exit before
another leg higher materializes. Just some thoughts.
The quest for range continues, it is becoming a
daily task to isolate and attack the sectors/stocks that are providing
opportunity. The S&P’s have taken a back seat to individual sector indices,
i.e. Drug Index (DRG),
Oil Driller Index (OSX). The sectors have
now become the “lead” indicator, not the S&P’s. It is the same trade set-up,
just using a different catalyst to draw you into the trade.
The one difference is that each day may require
you to keep an eye on 2-3 sectors and move between them. However, once a sector
“heats up” it typically has follow through for a few days.
Lastly, I mentioned a possible short yesterday in
EUR/GBP. That trade was initiated at .6970,
with a stop loss at .70. Look to leg out of a portion of the trade at .6925
(200 ema). This is a swing trade, and not intended to be a long-term hold.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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As always, feel free to send me your comments and
questions.