This May Be The Best Thing You Can Do Now

• May 13, 2004
• Tim Truebenbach

At
this point, we have seen a single accumulation day in the overall
market on 5/12 as the indexes rebounded from their morning sell-off to close at
the days’ highs.

 

 

 

How do we play things from
here?  The best answer is to not do anything…yet.  We are going to watch the
market and see if it can produce a follow-through day rally beginning next
Monday.  This would amount to a gain of at least 2% on heavier volume than the
previous trading day and preferably above-average volume.

 

The NASDAQ still is not in the
clear as it is currently nestled up against its 200-day moving average, which
may act as strong resistance.  We have not seen much in the way of action out of
growth stocks.  Healthextras (HLEX) attempted a breakout into yesterday’s
rally, but has since fallen short of success.

 

 

Overall, it is a good time to
be patient and wait until this market proves it has found some buyers and we can
identify some leadership.  Qualcomm (QCOM) appears to be etching out a
double-bottom base formation with accumulation. 

 

 

Engineered Support (EASI)
has managed to find support at its 200-day moving average for the time being.

 

 

One of the best things
investors and traders can do right now is identify unusual strength among
individual stocks and sectors.  Internets (HHH) for example, remain above their
50-day moving average and have acted much better than most stocks and market
averages.  If you are into shorting stocks or identifying weakness,
Semiconductors (SMH) are one of the weaker groups as they remain below both 50-
and 200-day moving averages. 

 

 

 

Homebuilders have not found
many buyers as higher rates are inevitable in this strengthening economy. 
Ryland (RYL) and Hovnanian (HOV) are two examples of stocks possibly
pausing before further downside.

 

 

 

Tim Truebenbach