What Bothers Me

August 15, 2002
Dave Landry

On Thursday, the Nasdaq opened and chopped around all day.
It did manage to close well and in the plus column.

This action has it near the top of its recent sideways
trading range/50-day moving average (a) and closing in on overhead resistance
(b).

The S&P also chopped around but also managed to close
higher. It too is nearing its 50-day moving average.

So what do we do? Based on price action, it appears that the
market continues to improve. On the other hand, the Nasdaq is bumping up against
resistance (see above) and the VIX is stretched away from its 10-day
moving average (i.e., a CVR3 sell). However, it’s not the mixed signals that’s
bothering me. It’s the continued choppy action, especially in the individual
issues (i.e., a setup triggers and immediately reverses). Therefore, I think the
song pretty much remains the same: Continue to keep it light until everyone gets back from
vacation or we get a more definable trend. One last point, Friday is option
expiration so this could add to the recent chaos.

Looking to potential setups, if you feel you must trade, the biotechs
(even though they too were choppy on Thursday), remain constructive.