The real story of this market
Dave Landry is principal of Sentive Trading, a money management firm, and a
principal of Harvest Capital Management. Mr. Landry is the author of two top
selling books,
>Dave Landry’s 10 Best Swing Trader Patterns And Strategies and
>Dave Landry On Swing Trading.
If you would like a free trial to Dave’s Nightly Swing Trading Alerts Report
On Tuesday, the Nasdaq started weak, bounced, but it soon found its
high and began to sell off. It found its low in early afternoon traded and then
chopped sideways for the remainder of the day. This action puts it well below its 50-day moving average. Â Â
The S&P also sold off fairly hard. Â Â
In the sectors, the action is worse than the overall market. Let’s
look at a few areas.
Internet, especially Information Providers, is in a strong downtrend.Â
Retail is breaking down out of a trading range.Â
Other areas of concern include (but not limited to) homebuilders, drugs,
insurance, and chemicals.Â
Previously strong commodity related areas such as the energies and metals and
mining where hit hard on Tuesday.
Energy:Â
Metals & Mining:Â
So What Do We Do? As mentioned recently, the indices continue to drop from their recent
Gatekeeper-like pattern (i.e. .786 retracement, email if you need the
rules/detailed explanation). Although this is concerning, the real cause for
concern is the sector action. As illustrated above, many are breaking down
and/or in bona fide downtrends. Even safe havens such as the commodity related
areas (e.g. metals & mining, gold, energies) were hit hard and are now at an
inflection point. Considering the above, avoid new positions on the buy side
and honor your
stops on existing longs. On the short side, since the market is oversold and the
methodology requires a pullback, continue watching for transitional shorts
(early trend) but wait for a bounce before executing.Â
As far as setups, I’m not seeing many meaningful shorts just yet. I would imagine on
bounce we should see a plethora of setups. Continue to remain patient.
Bat Man Returns
Wow? Has it been a week already (okay, Tuesday alone FELT like a week!)? On
Wednesday 2/08/06 at 11:00 AM EST, I will be hosting my weekly interactive
lesson. I plan on covering the above (market and sector conditions) in greater
detail, when trend following goes bad, recent emailed questions (feel free to
send me new ones), and some other stuff. As usual, admission is free but the
space is limited by the software. Email me if you need instructions on how to
join (the same each week) or if you would like the archives for the prior year
(covering a plethora of topics).Â
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free
trial to my trading service, click
here.
Â