Play It Stock By Stock
Usually, when I go
through the Daily Graphs on the weekend, I not only go
through the charts — but I look at
the names. This weekend, I decided to cover
up the names and just look at the charts. I did not want any bias on my
part on whether a bad chart was a
supposed “quality company.”
What did I find? Just as I thought — a
big-time split market. At this second,
it is vital to play the game stock by stock, sector by sector. The
major indices can continue to
stumble around, but underneath the surface, there
is a lot going on. So, get out your electron microscopes.
The major index that needs to be watched most
closely is the Nasdaq. The Nasdaq
is now working on a series of lower highs. It will only get worse on a
break below 1780. The two previous
higher lows are at 1960 (which just so happened
to be the 50-day MA) and 1870. Looking inside the Nasdaq, I found a lot
more shortables than longs. In
fact, Technology remains downright ugly.
Until things
change, I would be as light Tech as possible. You
can start with past leading
names like Nvidia
(
NVDA |
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been cracking over the past few weeks, or Panera Bread
(
PNRA |
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top and looks vulnerable. You can then start looking
at the leaders of yesteryear. These are the ones that every investor
prays are going to come back
eventually. Sun Microsystems
(
SUNW |
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looks like a horror show for starters,
and maybe take a look at Cisco
(
CSCO |
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This stock just put in another top and
broke important support at $18 — with volume! I guess you get the hint.
On the sector front, a few things to note. Restaurant
stocks are starting to look
toppy. They have had a tremendous run but nothing lasts forever. I would
hold off on most buying in the
group and look for more cracks. The Truckers
are another group that looks to
have topped. I am never excited when Cyclicals
move, because they only go for a short while. Homebuilders
is still hanging in well but
I worry about its late stage…so go slow there.
There are a few sectors in fine shape.
They include Defense (Northrop
Grumman
(
NOC |
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(
RTN |
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General Dynamics
(
GD |
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Lockheed Martin
(
LMT |
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names (Kraft Foods
(
KFT |
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Wrigley
(
WWY |
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(
PG |
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I would continue to play longs close to the vest. I would continue to exploit
both sides. I would continue to recognize that it is going to remain tough.
I did have one note on
sentiment: Put/Call numbers have spiked again above 1.0
— indicating investors getting very scared. The last time this number was
above 1.0 was Sept. 21 — the day
the market turned. I use this as a secondary indicator
but I do not ignore. When investor sentiment tips to extremes, it is
usually best to go the other way. But until the market gives me a sign
— it stays a secondary indicator. Stock price action first.