The Path Of Least Resistance (i.e., Blue Arrows)

July 26, 2002
Dave Landry

On Friday, the Nasdaq opened firmer
and chopped higher early but began
to sell off. It worked its way lower for most of the day but rallied going into
the close.

The S&P also strengthened after chopping around for much of
the day.

So what do we do? Even though the indices showed some
strength late on Friday, the big blue arrows are still pointing down.
Further, many sectors (like the S&P itself) appear to be forming
pullbacks from lows. Therefore, until proven otherwise, the path of least
resistance appears to be lower. Continue to focus on the short side. However, in
my experience, good times often follow bad, and lately the short side has been
really good. So keep it light.

Looking to potential setups, the banks
(
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have pulled back from their recent meltdown. Likewise, Bank Of America
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looks poised to resume its meltdown. Note: since the entry is so far away,
aggressive daytraders may look to play a breakdown of its morning range (vs.
waiting for an entry),
especially if it gaps open and reverses.