Tech indexes at critical levels, here’s why

The realization that happy days of easy money are not here has hit some key
segments quite hard — tech in particular. Since this is a leading segment and a
bell-weather, investors should monitor closely whether tech stocks and indexes
break down here. A high volume close by the
(
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PowerRating) under 40, by
(
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under 47, AND by
(
XLK |
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investors should watch closely for. Become more defensive and short-hedge with
tech index shorts should this occur. We would be concerned that some of the
high-flyers such as gold, oil, EM’s, Asia, Latin America, and resources might
follow suit and a plurality of high volume further declines that accompany or
quickly follow on the heels of a tech breakdown should be a signal to move to a
more defensive position and down towards core positions only, even in these
sectors. Let’s continue to watch the verdict of the market in this seasonal
negative period closely.

I continue to suspect strongly that the period directly ahead is one where it
may be ABSOLUTELY CRITICAL for investors to have a solid grasp and understanding
of the Big Picture Macro background of global markets, the top secular themes,
and the huge vulnerabilities of this environment. A potential MAJOR SHOCK to the
markets is brewing and those unaware could easily be sideswiped.

It is the REACTION to events that is important to watch. This week we had a Fed
reaction to higher bond rates and the market chimed in with a high-volume big
decline. Further downside action by the market on high volume, particular in
leading tech indexes, should lead investors to move more toward the exits with
all but core positions as evidence mounts of a market decline in force.

Meanwhile in our US selection methods, our Top RS/EPS New Highs list published
on TradingMarkets.com, had readings of 127, 141, 131, 109 and 80 with 18
breakouts of 4+ week ranges, MLEA as valid trade meeting criteria, and no close
call. This week, our bottom RS/EPS New Lows recorded readings of 14, 3, 4, 6 and
15 with 0 breakdowns of 4+ week ranges, no valid trades and no close calls. The
“model” portfolio of trades meeting criteria is now long USG, GG, TS, MTU, and
WIRE (watch critical 50 day ma support zones carefully here for stops in many of
these). Continue to tighten up trailing stops whenever possible on stocks with
open profits and strive to move stops to break-even or better as quickly as
possible in new entrants. Look for short-sale hedges against these positions in
some of our favorite short sale sectors like interest rate sensitive, Utilities,
managed health care, big-cap internet, techs, and home builders.