If You’re Long The Homebuilders, Consider This

Today was yet ANOTHER
distribution day for the Nasdaq (assuming my data and eyes are correct — looks
like volume came in a little higher than Friday.)

Although the Nasdaq Composite
still remains in its trading range, the Nasdaq 100 (QQQ) and the Semi-Holders (SMH)
both broke below recent support levels. This is not good.

The S&P 500 has held up quite
well against all the distribution in the Nasdaq. Still, the action there isn’t
very encouraging either. After briefly poking above its trading rage on Friday,
it failed to close there and it now well back below those highs.

There hasn’t been a pronounced
spike in the VIX in quite a while. Today’s selling looks like it may have
started to put some fear into the market. Hopefully it will, as a spiking VIX
would substantially increase the odds of an upside reversal.

Home Lenders and Home Builders
have done very well lately. Most of the stocks in these areas that broke out
and moved higher recently have had breakouts from very late stage bases. If you
have some nice gains in these stocks I would be careful not to give those gains
all away. I noticed many reversal bars in these stocks today.

I’ve noted several stocks
setting up in the medical equipment sector. Should the market regain it’s legs,
this group could provide some nice opportunities.

Caution on the long side, with
increased selectivity and tighter stops remains prudent.

I’ll be back Wednesday with a
regular column.

Good trading,

Rob