If You Must Trade, Focus On These Sectors

July 28, 2003
Dave Landry

Looking to the indices, on Monday, the Nasdaq chopped
around in a narrow range.

So far, it remains above its recent breakout levels
(support).

The S&P also chopped around in a narrow range.

Looking to the sectors, retail hit new highs and remains in
a longer-term uptrend. The semis finished higher and remain above their 50-day
moving average but still look choppy. Gold gave back some of its recent gains,
but so far, still looks like it is in breakout mode.Â

On the downside, those weaker sectors mentioned recently
such as selected energy, utilities, and the homebuilders still look poised to
continue lower out of toping patterns (e.g. inverted cup and handles). Software
still looks like it has formed a top and could continue to rollover.

Â So what do we do? There’s really not much to
write about tonight (Monday). Sort of a “do over” kind of day.
Longer-term, the S&P remains stuck in a trading range. And, the VIX remains
near 1-year plus lows. Therefore, I still don’t see any reason to get too
aggressive on either side of the market. If you must trade, watch stronger
sectors such as retail for potential opportunities. On the short side, stick
with those sectors that have already rolled over such as those mentioned above.

Looking to potential setups, Pulte Homes
(
PHM |
Quote |
Chart |
News |
PowerRating),
mentioned recently and in the
weak homebuilders (a), still looks
poised to continue its rollover out of a pullback/big picture inverted cup and
handle. Wait for an entry though–possibly below its pivot low(b), since it did a “head fake” on
Friday.Â