Should You Be Concerned About Tuesday’s Action?
Looking to the indices, on Tuesday, the Nasdaq opened
slightly lower and after initially bouncing around, began to sell off. Then
after some mid-day consolidating, the selling resumed going into the close. This
action has it closing poorly and gives back all of Monday’s gains.
The recent highs, circa 2160, could prove to be minor
resistance here.
The S&P put in similar performance.
Looking to the sectors, even with Tuesday’s poor
performance, most areas remain in strong uptrends. These include, but not
limited to, telecom, software, hardware (e.g. networking,peripherials), health services, insurance, most financials,
banks(most), broker/dealer, scientific and technical instruments, automotive,
consumer durables, and energy. On the downside, Tuesday’s slide in the semis puts
several of its sub-sectors into question (especially equipment manufacturers). Any
additional downside here could suggests a top. Most areas of
metals & mining are also beginning to look questionable. Retail remains
stuck in a wide-and-loose trading range. Gold still looks vulnerable as does the
homebuilders.
So what do we do? Since most areas
remain in uptrends, I see no reason to get too excited about one day down. True,
the semis do look punk. And, Internet will likely be weak (initially) on
Wednesday based on the after hours reaction to the Amazon earnings announcement.
However, overall, I think things remain constructive. Said alternatively, the
longer-term uptrend remains intact. Therefore, focus mostly on the long side but
wait for entries just in case we see more corrective action on Wednesday. On the
short side, I see no reason to be hero and fight trends in strong sectors.
Rather, continue to focus on weaker areas such as gold and the homebuilders.
Looking to potential setups, Nanometrics
(
NANO |
Quote |
Chart |
News |
PowerRating),
in the aforementioned strong scientific & technical instruments sub-sector,
looks like it has the potential to resume its recent thrust higher out of a
Double Top Knockout-like setup. However, make sure you wait for an entry just in
case it is influenced by the selling in the semis.
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S.
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