Too Soon To Celebrate?
On Thursday, the Nasdaq gapped open and rallied. It then
pulled back by mid-day and drifted for much of the afternoon. Finally, late in
the day, it sold off to give up about half of the intra-day gains.
Thursday’s action has the Nasdaq probing above the 50-day
moving average but failing to close above it. This stalling action in the area
of the topping formation is somewhat concerning. It would be constructive
if the index stabilizes above 2100 and the 50-day moving average. Otherwise, a
drop back into the recent range could be a warning flag.
The S&P had a decent day
but it too tailed off going into the close. Thursday’s action keeps it in the
1200 to 1240 range. As the late Phil Hartman in his Saturday Night Live Frankenstein
character used to say, a break above this range “GOOD!” a break below
“BAD!”.
We finally got the breakout
from the low volatility situation in the Q’s
(
QQQ |
Quote |
Chart |
News |
PowerRating). Now, before you run out
and buy them, keep in mind that sometimes the first move out of a low
volatility is a false move. This is one of my “ancient Chinese
secrets”–so don’t tell anyone.
So what do we do? Today, my office was flooded with phone
calls claiming that this is new bull market. I hope they’re right. Me? I’m
concerned about the fact that the indices tapered off going into the close.
Also, relatively low VIX and VXN readings suggests some complacency out there.
Therefore, I think the modus operandi is to continue to precede with caution.
Looking
to potential setups, as I tool through hundreds of charts tonight, I see a lot
more stocks set up on the short side than long–nothing scientific about this,
it’s just what I’m seeing.
On the short side, Blockbuster
Entertainment
(
BBI |
Quote |
Chart |
News |
PowerRating) has formed an inverted cup and handle (and Bow Tie). I
flipped the chart over so you wouldn’t have to stand your head to see it.
Advanced Micro Devices
(
AMD |
Quote |
Chart |
News |
PowerRating)
appears to be stalling out in its retrace back to the neckline (a) of a head and
shoulders formation.
Digital
Lightwave
(
DIGL |
Quote |
Chart |
News |
PowerRating), mentioned recently, still looks vulnerable.
Other
Thanks
for the emails discussing and debating patterns mentioned recently. This keeps
me on my toes and makes me think.
Best of luck with
your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“…Your book is organized,
concise and well documented in your charts. It is an easy read for a great system..”
Eric L.Â
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