Move Is Overdue
Even with yesterday’s pullback from resistance, I don’t think a lot has changed. The markets were overdue for such a move, based on the overbought and bullish sentiment indicators I have been outlining for you. It is not by accident that the stall came right at the important 1177 mark on the
S&P 500
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PowerRating). It is also normal to move back down to work fear back into the equation.
The Nasdaq
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PowerRating) (specifically Tech) remains in poor shape technically. I continue to find more shortable names and hardly any longs or any long set-ups. Continue to underweight this area. Bounces will happen and they will be sharp. I would just not venture into the shark-infested
Computer, Telecom or Wireless
waters. The only area of Tech that has decent looking charts remains in the
Semiconductor area. And speaking of Semis,Â
watch the SOX. I am. It is back at important support. A break below 570 would be on the worrisome side. Until, I see real power measured by price and volume…nothing doing.
The NYSE-type stocks continue to lead. About the worst thing I can say about them is that they are extended and are in dire need of a pullback. I am talking about the many
Cyclical, Financial, Medical
and Oil-related areas.
Now for the changes. I have been saying that the Homebuilders
were in the late stages of their move. I do believe that the recent drop puts in the near-term top. They have become quickly oversold, so I do expect bounces. But I would now look to sell the bounce instead of buying the drop. This fits in well with my thoughts that the
Fed is now done with their easing and the bond market being topped out here. You will only hear good things about their earnings but keep in mind, they are a pure interest rate play.
Another area that I believe has topped is the Airlines. Most broke
their 50-day averages recently. The number of sectors breaking down is my best indicator of the market. I will be watching very closely.