There’s Only One Thing That Concerns Me

On Monday, the Nasdaq opened firmer and remained generally
firmer until around mid-day. It then traded back and forth for the remainder of
the day. This action keeps
it below the 2100 resistance level. It could be settling into a narrow trading
range.

The S&P put in a similar performance. This action
keeps it below overhead resistance/the .786
retracement level of its last leg down. It too could be settling into a fairly
narrow trading range.

Except for interest-rate-sensitive areas such as the
homebuilders, real estate, and the banks, overall, the sector action remains
constructive. Technology remains strong with areas such as Internet and
software (most) in strong uptrends. Other areas of tech such as the semis and
computer hardware appear to be attempting to make a transition to uptrends.
Biotech still remains below its old highs but is challenging them. Outside of
tech, retail appears to have stabilized from last week’s sell off. Health
service (overall) remains strong. Even areas which have been doing poorly such as
the transports have been improving of late.

^next^

So what do we do?
As discussed recently,
overbought markets can resolve this condition in both time and/or price. And so
far, by trading sideways above their 50-day moving average (aka “da
fitty”), the indices are “walking it off.” Combine this
with positive sector action and conditions remain generally favorable. My only
area of concern remains the fact that the indices remain below overhead
resistance. Considering the above, continue to nibble on the buy side but
be willing to scale out as resistance is approached (just in case the indices
can’t break through).

As far as setups, American Eagle Outfitter
(
AEOS |
Quote |
Chart |
News |
PowerRating)
, in
the strong retail-apparel, looks like it has the potential to resume its uptrend
out of a Double Top Knockout-like setup, especially if it can take out (i.e.,
trade above) last Thursday’s high.

Best of luck with your trading on Tuesday!

Dave Landry

dave@davelandry.com

P.S. Reminder: Protective stops on every trade!

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