These Sectors May Be Breaking Down
I have been telling you that the market would
consolidate/correct…but I must tell you that the action is ridiculous. We are
back to reversing the reversals of the reversals. But there is good news. Simply
put, if this is all the market is going to correct…after such a big move off
the lows…then the market remains in fine shape.
For sure,
NEW HIGHS have contracted…volume patterns are going the wrong way…sentiment is
poor…valuations are high…the Mets can’t win a game. My main focus is on the
fact that most stocks remain in good shape, most sectors remain in good shape
and major indices remain in good shape. The game is quite simple at this point.
Since the market has been trading in a tight range for the past several weeks,
it is easy to identify support and resistance levels. Whichever way it breaks,
expect a decent move out of this range when it happens.
Up front, I can’t
help but continue to give the nod to the bullish camp, especially since the
market refuses to break down and especially after Friday’s romp. I suspect a
break to the upside…but remember, acting on that type of talk just gets one in
trouble. The market couldn’t care less about my opinion. If the market breaks
out again, we simply react to it. If it doesn’t it doesn’t.
Unlike other
technicians who are out calling for 10,000 Dow, I believe it is folly to jump
the gun. This same technician called for a 6000 Nasdaq. Just remember what I
have told you…in bull moves, surprises happen to the upside. Once again, here
are support and resistance levels you need to know…Dow 8970 and 9352…S&P 500
974 and 1016…Nasdaq 1686 and 1776.
Another point I want
to make is that rotation continues. If you recall my report from
last Monday, I stated that I expected Dow-types to start the lead. That’s
exactly what happened as CYCLICALS and
INDUSTRIALS are moving out…thus the Dow looks
first in position to move out of this range.
Lastly,
while most sectors remain in fine shape, here are some areas to be careful with
as they are in the midst of breaking down…Oil and Gas
Services, Media-Radio, Retail-Drugstores, Utilities, Finance-Mortgage,
Homebuilders, Telecom Services.
Gary Kaltbaum