Why Buying Could Be Dangerous At This Juncture

January 6, 2003
Dave Landry

On Monday, the Nasdaq opened firmer and rallied for a solid
trend day higher. This action has it closing well above its 50-day moving average.

The S&P put in a similar performance. It too is now well above its 50-day moving average.

The VIX remains stretched away from its 10-day moving
average and is now approaching levels not seen since last June.

So what do we do? Monday’s rally is impressive, very
impressive. However, I would urge caution against buying a severely overbought
market with a stretched VIX. If this is the “real deal,” we will have
plenty of time to buy along the way. For now, look for shorting
opportunities in those sectors mentioned recently that failed to materially
participate in Monday’s melt up, namely retail and biotech.

Looking to potential setups, the biotechs, mentioned
above, looks like
they have the potential to continue their rollover out of inverted cup and
handle-like formations.

Considering the above, Myriad Genetics
(
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looks like it has the potential to continue its downtrend out of a pullback.