What Concerns Me About Tuesday’s Action
Looking to the indices, on Tuesday, the Nasdaq opened
firmer but quickly found its high and began to sell off. The selling
persisted/accelerated as the day wore on. This action has it closing poorly and
below its 50-day moving average (the red line below). Â
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The S&P put in a similar performance. Â
Looking to the sectors, many like the market itself, are
stalling below multiple tops. Technology is a good example of this. Telecom,
software, hardware, and Internet all have sold off hard as of late. Higher
flying tech areas such as the semis weren’t spared either. Considering the
above, we could be see transitional shorts setting up in many of these sectors
soon. On the upside, gold and most other metals remain strong. Major drugs have
also been very strong as of late (Tuesday notwithstanding). Â
So what do we do? The lack of follow
through from Monday’s turnaround is concerning. Also of concern is the fact that
all major indices closed below their well watched 50-day moving averages.
Further, as implied above, many sectors are stalling, leaving only a few left
that are in bona fide uptrends. On the other hand, the market is oversold based
on high 3-day average NYSE TRIN readings and quite simply, price itself.
Further, the VIX is stretching away from its 10-day moving average. All of this
could set up buy signals (soon) in several of the market timing systems that I have
created/follow. However, keep in mind that just because the market is
oversold doesn’t mean that it can’t go lower. Therefore, there’s no need to be a
hero just yet-wait until the market shows signs of stabilizing before looking to
buy. On the short side, since we are oversold, you might want to wait for a
slight bounce and then look for opportunities in those areas that appear to be
rolling over (i.e. stalling below multiple tops).
No setups tonight. As mentioned above, we could see
numerous shorts setting up in vulnerable areas such as tech soon.Â
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
P.P.S. Learn my best swing
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