Tread Lightly
Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
markets opening. Therefore, overnight events may alter the
outcome of these observations.
face=”Arial, Helvetica”>Join me, fellow TradingMarkets.com
content providers, and other traders and money managers at
the Trading Markets 2000 conference at the Venetian Hotel
Resort and Casino in Las Vegas on October 13-15, 2000.
At
the time this is being published, the Globex S&P futures
are trading up 0.80 points and the bond market is trading up
2 ticks.
face=”Arial, Helvetica”>On Tuesday, the Nasdaq opened lower,
based on a bad CPI number. After a brief bounce, the selling
resumed for most of the morning. It then grinded higher in a
choppy fashion, but the selling once again resumed into the
close. This action has it closing poorly (a) and suggests
that traders weren’t too eager to take ’em home.
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Tuesday’s
sell-off wasn’t limited to technology. The S&P lost over
1% of its value.
Some
were quick to point to lighter volume. Me? You know how I
feel. Markets that fall on light volume are “falling on
their own weight.” After all, if they fall on light
volume, what will they do on heavy volume? That’s just my
opinion; I might be wrong.
On
a shorter-term basis, it looks like the Nasdaq is simply
pulling back before its next up-move. However, you can’t
ignore the fact that the Nasdaq 100 stalled out right at the
61.8% retracement of the March-to-June lows. See
archive and recent commentary from Kevin Haggerty for
details here.
On
a positive note, there were some nice moves in the
speculative IPOs, in spite of the overall market. Stocks
such as Storage Networks
(
STOR |
Quote |
Chart |
News |
PowerRating) (nice call, Cooper!)
were up as much as 17% intraday. I suppose during earnings
season, it’s safer to stick with stocks that have no proven
track record or earnings.*
So
what do we do? The IPO action suggests that the speculative
sentiment is still alive. However, you can’t ignore the fact
that the Nasdaq 100 has stalled out, as if on cue. This
action leaves us “officially” still in
bear-market-rally mode. Therefore, until we break through
these levels, you may want to tread lightly.
Looking
to potential setups, Newport
(
NEWP |
Quote |
Chart |
News |
PowerRating), on the
From Highs List, looks like it has the potential to
rally out of a high-level, micro-V-bottom cup. Just wait for
follow through to the upside, as it did close poorly on
Tuesday.
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Continuing
on the pullback theme, Legg Mason
(
LM |
Quote |
Chart |
News |
PowerRating), also on the
From Highs List, appears to be stabilizing as the
broker/dealer sector
(
$XBD.X |
Quote |
Chart |
News |
PowerRating) corrects from its
recent run-up.
Sepracor
(
SEPR |
Quote |
Chart |
News |
PowerRating), mentioned
night, still looks like it has the potential to resume
its uptrend.
Portal
Software
(
PRSF |
Quote |
Chart |
News |
PowerRating), on the
List, looks poised to rally out of a pennant formation.
On
the short side, Phillips Petroleum
(
P |
Quote |
Chart |
News |
PowerRating), mentioned Monday
night, still looks like a short, as long as it stays below
its 50-day exponential moving average.
Best
of luck with your trading on Wednesday!
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!
*I
don’t mean to pick on STOR. As long as it goes up (for
longs), I don’t care what it does or how it does it.