Is It Over In The Energies?
On Monday, the Nasdaq traded back-and-forth in early
trading but found its low by late morning and began to rally. It then traded
mostly sideways throughout the afternoon before firming going into the close. This action has it closing
well.
The S&P put in a somewhat similar performance.
As far as sectors, tech areas that where stalling short of
last week’s highs such as software, telecom, and Internet broke out nicely on
Monday. The semis remain in a wide-and-loose trading range. Many financials
still look questionable. Specifically, broker/dealer still looks like a
head-and-shoulders top. On the short side, previously strong commodity areas
such as metals & mining and the energies appear to be breaking down from
high levels (i.e. a First Thrust–email me if you need rules).
So what do we do? Late last week there were
some contra-trend buy signals triggering (Oscillator Swing System and TRIN
Reversal). This, combined with oversold nature of the market and the fact that
it (basis the S&P) found support at its September lows, suggests that we are
in bounce mode. My only concern is the fact that the market has gone essentially
no where in the last 6-weeks. One has to wonder if this bounce will only take us
to the top of the trading range. Considering this, you might want to play the
long side but keep it light. On the short side, look for transitional setups
(e.g. First Thrusts) in those areas that are breaking down from high levels
(e.g. the aforementioned commodity stocks).
As far as setups, Petroleo Brasileiro
(
PBR |
Quote |
Chart |
News |
PowerRating) looks like
it has the potential to continue its rollover (i.e. a potential short) out of a
First Thrust.
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
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