What Impresses Me About This Market
Looking to the indices, on Tuesday, the Nasdaq opened
firmer and after briefly trading higher, began to sell off. However, it found
its low in early trading and then rallied for a solid trend day higher. This action
puts it at its highest level in over a year.Â
I’m especially impressed with the performance of the
S&P. Tuesday’s action breaks it out of the trading range its been stuck in
for the past 3-months. And, hopefully, it’ll stay out of it so I won’t have to
bore you anymore with trading range talk.
Looking to the sectors, overall, the rally was broad based.
Yet again, many areas made, approached, or remain at new highs. These
include (but not limited to)Â cyclicals (automotive, metals & mining,
chemicals, manufacturing, and various sub-sectors), consumer durables, consumer
non-durables, computer hardware, retail, defense, and selected telecom. Further,
there were very impressive breakouts in software, Internet, broker/dealer, and
in major airlines (yes, you read that right, even major airlines). Even areas
that have been lagging a bit such as banks and biotech were able to probe
higher into overhead resistance. Gold pulled back a bit but so far, still
remains in a strong uptrend.Â
On the downside, major drugs put in a solid rally but so
far, still appear to remain in a strong downtrend.Â
So what do we do? I think it’s very
important that traders came back in a buying mode (see Friday’s commentary for
more details). I especially like the way that the market “faked out”
many by dipping after starting higher and then mounting a solid rally. It’s
likely that this action shook out some nervous longs, attracted some eager
shorts and could help clear the way for the market to trend higher. So is it an
“all clear”? Maybe. First, I’d like to see the S&P stay above its
trading range. Also, because my methodology requires a pullback, very few
meaningful setups were generated by my database. This suggests that the market
is overbought. Therefore, now is the time to start putting together your buy
list. And then, after we see some corrective action, look to enter if (and only
if) the trend shows signs of resuming.
No setups tonight. Based on the action in the indices, we
should see a plethora of setups on the first pullback.
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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“…..The best thing about Dave Landry on Swing Trading is that it is so easy to read and understand. Examples are numerous and the theme of money management – with concrete examples – is repeated throughout the entire book….”
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