What Soon-To-Be Inmate ## 3571 Might Say About This Market
On Wednesday, the Nasdaq sold off on the open but found its
low in early trading. Then, after trading sideways for much of the day, it began
to rally nicely. However, it sold off going into the close. So far, it remains
above its 50-day moving average but below the 2100 resistance level.Â
The S&P put in a similar performance but wasn’t able to
hold on to the bulk of its afternoon gains. This action has it closing poorly.
It too remains above its 50 but it also remains below overhead resistance.Â
Even with the recent sell off, the sector action remains
generally positive. Many areas remain in strong uptrends. These include (but not
limited to) selected software, HMOs (and some other areas of health services),
gaming, selected retail (e.g. apparel) and biotech. Internet has been doing
exceptionally well and will likely continue higher on Yahoo!’s blow out earnings
(announced after the close). Even recently weaker areas such as semis, computer
hardware, and tech in general for that matter, have been improving as of late.
In fact, many are forming cup and handles, First Thrusts, and Bow Ties.Â
^next^
So what do we do? Markets can resolve an
overbought condition in both time and/or price. Each day that the market stays
above its 50-day moving average, is, to quote soon-to-be inmate #3571, is
“a good thing.”* On the price side, so far, the price correction has
been orderly. Although I’m a little concerned about the amount of overhead
resistance, as discussed above, the sector action remains generally
positive. Therefore, look to nibble on the buy side but wait for entries or some
signs of strength due to recent weakness and the fact that the market remains
overbought. Also, should the market trade higher, you might want to lighten up
as resistance is approached.
 As far as setups, Mattson Technology
(
MTSN |
Quote |
Chart |
News |
PowerRating), in
the aforementioned semis, looks like it has the potential to continue
higher out of a Bow Tie/First Thrust type setup (and bigger picture cup and
handle–not shown).
MGM Mirage
(
MGM |
Quote |
Chart |
News |
PowerRating), in gaming, looks like it has the
potential to continue higher out of it first pullback since breaking out of a
high-level base.Â
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is now shipping.
Click here for details.
*Speaking of which (or witch, depending on how you feel about these matters),
have you seen IMCL lately? Golly! (the censors got back from vacation
today)Â