Three Reasons Why I Believe A Top Remains In Place
On Friday, the Nasdaq opened slightly firmer but soon began
to sell off. It found its morning low fairly quickly and began to rally.
However, it found its high by mid-day and sold off for the remainder of the day.
This action has it closing poorly.
As mentioned recently, the 200-day moving average (not
shown), circa 1880, could be the next stop here.
The S&P put in a somewhat similar performance.Â
So what do we do? Will the market be
higher by the end of the year? Will it be lower? I don’t know and don’t pretend
to know. I’ll leave that to the soothsayers. I take a shorter-term approach and
believe in what I see. And so far, it sure looks like a short-term top remains
in place. What do I base this on? First, the sharp sell off after just tagging 1
year plus highs. As mentioned recently, this action has everyone who bought at
or near the top (oops, highs) at a loss and seriously re-thinking their
investment. Second, my database has begun to generate a plethora of shorts.
Third, virtually no area has been left unscathed. Tonight (Friday), I’m seeing setups
in metals & mining, financials, insurance, selected health services,
selected leisure, media, chemicals, auto parts, software, telecom, and consumer
non durables (paper). Even previously strong areas such as energy and especially
biotech are beginning to show signs of breaking down. I suppose this is logical
since the indices themselves appear to be resuming their sell off out of their
first pullback (i.e. a First Thrust–email me if you need the rules).
Considering the above, for now, I think the short side remains the logical side to
play.  Â
Looking to potential setups, Hartford Financial Services
(
HIG |
Quote |
Chart |
News |
PowerRating),
in the aforementioned financial/insurance sector, looks poised to continue its
rollover out of a big picture topping formation/First Thrust.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is now shipping.
Click here for details.
Â
Â