Summer-Rally Cult Still Waiting For Great Pumpkin
Friday’s positive action left traders chanting the
“summer-rally” mantra throughout the weekend. The decibel levels were
deafening in Tuesday morning’s action. So it figures that we’d have to see at
least some kind of short-term pullback.Â
As this is being written, the Nasdaq is down 20 points after being positive
for much of the session.Â
If you’ve been following Chart of the Day for a while, you know that I
focus more on the key components of indices rather than the indices themselves
in order get a feel for the real strength or weakness of a given market. This is
particularly true of the cap-weighted Nasdaq.Â
Today is no exception. I am looking closely (as I have been for the past
week) at the Nasdaq bellwethers Intel
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PowerRating), Sun Microsystems
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Cisco
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PowerRating) and finding some interesting
parallels–literally.Â
These charts of SUNW, CSCO, and ORCL will show you what I mean:
As you can see, these three stocks have strikingly similar
downtrend-channel patterns that have been taking shape for the past three weeks.
In fact, the downside bias that we saw take hold of the Nasdaq mid-session on
Tuesday coincided with a bounce off the top of the channels in the case of SUNW
and CSCO.
While INTC failed to break above its three-week range, it
nevertheless was stronger throughout the trading day than its three bellwether brethren.
No one can say whether we’re just
seeing a short-lived jolt for the “summer-rally” cult or the beginning
of a breakdown move, but I’ll be on the bell-watch for clues.
See you tomorrow,
Eddie