Looking Up
We made it through the summer and now it’s back to business. The question is are the markets ready to work their
wonder
as “school is back in session”? Who knows, but there is one thing for sure, we
have to wait until the market shows us its hand before we are ready to run. Until
then, we will wait patiently and continue to test the waters by adjusting
position size and using tight stops. No change in the timing
signals as they are still
warning us to hold steady.
Some positive news came out in the
session as the NAPM numbers for August were better than expected. The news
was a breath of fresh air as both new orders and production moved above the 50%
level. New orders rose to 53.1% while the production index moved up to 52.2%.
The overall index rose to 47.9%, better than economists’ consensus of 44%.
It also should be noted that the
prices paid index within the NAPM report declined once again, which indicates that inflationary pressure
is also dropping. This is actually good news in that it allows the Federal
Reserve Board more room for additional rate cuts if necessary.
In looking for some potential momentum
plays, Bradley Pharmaceuticals
(
BPRX |
Quote |
Chart |
News |
PowerRating) looks interesting. Price has formed a
symmetrical triangle. The pharmaceutical company is showing some nice earnings
growth (600%, 999%, 140% and 200%) over the last four quarters.
Among the ETFs which were moving
higher in the session, the WEBS-Canada Benchmark
(
EWC |
Quote |
Chart |
News |
PowerRating) scaled higher 2.2%.
The DJ U.S. Large Cap Value Street
Tracks
(
ELV |
Quote |
Chart |
News |
PowerRating) gained 1.9%.
And the iShares DJ U.S. Chemical Index
fund
(
IYD |
Quote |
Chart |
News |
PowerRating) closed up 1.8% as it cleared its 20- and 50-day moving averages.
The Relative Strength line looks very strong as it continues to rise before
price.
Sliding in the session were the
Internet Infrastructure HOLDRs
(
IIH |
Quote |
Chart |
News |
PowerRating) which fell 4.8%. The fund tested
support and closed right at its support level. It appears that follow through to
the downside could happen as the descent of the Relative Strength lines is
decreasing at a faster pace.
The Broadband HOLDRs
(
BDH |
Quote |
Chart |
News |
PowerRating) closed
off 4.7%.
The Software HOLDRs
(
SWH |
Quote |
Chart |
News |
PowerRating)
were lower by 4.5%.
Remember that all securities are
risky. In any trade, you should always reduce your risk by adjusting position
size and placing open protective stops where you will sell your long or
cover your short in case the market turns against you. For an introduction to
combining price stops with position sizing, see Loren Fleckenstein’s lesson, Risky
Business.
Greg
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