Too Soon To Short?
Looking to the indices, on Monday, the Nasdaq gapped lower
and sold off hard in early trading. It found its low fairly quickly and worked
its way back to near its open but was unable to take it out. It then traded back
and forth for the remainder of the day.
So far, its uptrend remains intact. However, it’s important
for it to close today’s gap down.
The S&P also sold off hard.
Looking to the sectors, the two that I have most concerned
about lately, retail and the semis, did poorly on Monday. It’s important for
both of these areas to turn back up, otherwise a top could be in place here. The
cyclicals were another area that sold off hard and appear to be stalling out
before making it back to their old highs.
On the bright side, even though they were lower on Monday,
most areas of drugs remain constructive and so far, only appear to be
correcting. Internet and most areas of computer hardware also only appear to be
pulling back (so far).
So what do we do? Monday’s action is disappointing
to say the least. However, other than those areas mentioned above, there’s no
reason to become too bearish–yet. With that said, I’d hold off on shorting
until we see a larger thrust down in those questionable areas. Only then, should
you begin to look for transitional setups. On the long side, now might be the
time to put you hands in your pockets and wait to see how far this sell off will
take us. Simply waiting for an entry might keep you out of trouble here. Should
you decide to buy, focus on those areas mentioned above that remain generally
constructive in spite of today’s sell off.
No setups tonight.
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….I just finished reading your book for the 3rd
time…the book has paid for itself trade after trade…thanks for a straightforward
swing trading manual! …”
Steve T.
