Sectors To Focus On AFTER The Market Corrects
On Wednesday, the Nasdaq opened flat and after briefly
chopping around, it began to rally. Then, after a deep mid-day pullback, it
resumed its rally going into the close.
This action has it closing well and keeps it above its
recent trading range.
The S&P put in a similar performance.
It too remains above the top of its recent trading range.
The VIX did not hit new lows but still remains stretched
away from its 10-day moving average.
Looking to the sectors, most sectors remained strong and
many continued to hit multi-month highs again on Wednesday. These include (but are not limited to) homebuilders, broker/dealer,
banks, defense, insurance, Internet and the semis. Some others that didn’t
materially participate in the rally such as retail remain near multi-month
highs.
So what do we do? Once again, I remain constructive towards the market based
on the action in the indices and the sectors. However, Wednesday’s rally has the
market even more overbought based on short-term and longer-term average advance
decline readings and price itself. Further, the low and stretched VIX still
suggests that we are still due to correct (as mentioned last night, remember, this indicator can have long lead
times). Therefore, I still think the best thing to do is to continue to wait for the
correction and then look to get long stocks in some of the aforementioned
strong sectors. For the aggressive, yet again, you might look to play
an opening gap reversal in the index shares, if they gap higher on the open
and then show early sides of reversing.
No setups tonight. Remain patient. We will likely see a
plethora of setups on the next correction.Â
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….. your book is very clear and easy to follow. I think it is
helping me to improve….”
Judy C.
