Mixed Emotions
The market has offered us mixed emotions following
the weekend holiday. We initially faced a distribution day that
brought the count to four total distribution days within the last 10 trading
days. Yesterday the market rallied on heavier volume in hopes of convincing us
that things were alright after all. Fortunately, we won’t be fooled by one
day’s trading.
After we received that fourth distribution day on Tuesday, the final evidence
came into place that the market has a good chance of heading lower over the
intermediate-term. When this is the case, buying stocks usually doesn’t work
too well and shorting stocks can also be very tricky. One suggestion may be to
look toward lagging indices and sectors for potential short opportunities. Just
remember that shorting is a whole new animal that doesn’t necessarily follow
the same rules as buying securities. It is now time to closely watch any current
holdings we have for signs of trouble and hold off new purchases. The only thing
that can change this stance is another rally marked by a follow-through day.
Over the past few weeks, breakouts have been failing all over the place. This
was the first sign of trouble and one of the most memorable was Coinstar
(
CSTR |
Quote |
Chart |
News |
PowerRating).
Since then, we’ve seen a few stocks waiver around the resistance they have
tried to break through. Corinthian Colleges
(
COCO |
Quote |
Chart |
News |
PowerRating), Apollo Group
(
APOL |
Quote |
Chart |
News |
PowerRating), Ball
Corp
(
BLL |
Quote |
Chart |
News |
PowerRating) and Isle of Capri Casinos
(
ISLE |
Quote |
Chart |
News |
PowerRating) are some of the names that I have been watching do this.
The general market is probably the sole reason these and other stocks have
had trouble pushing higher the way we would all like to see. It is extremely
important to honor solid sell rules and allow them to take us out of positions
if the market is going to fall apart from here. For example, Ball
Corp
(
BLL |
Quote |
Chart |
News |
PowerRating) broke out of a beautiful base, but has been hitting
new highs on decreasing volume. This warrants caution for anyone holding this
stock.
For now, it is time to let the market dictate our action. If we are forced
into cash, then so be it. Profitable opportunities will come along eventually.
In the meantime, protection of capital remains the primary goal while the market
shows us uncertain action day in, day out. It will be important to see how any
potential leaders act, as well as any breakouts that have yet to fail. It will
also be important to look for a new rally to begin, accompanied by a
follow-through day a week later.
Until Tuesday,