Why I Remain Bullish But Think We Could Correct
On Monday, the Nasdaq opened firmer and after a brief dip,
began to rally. However, it found its high in early trading and sold off. It
made another attempt at new highs early in the afternoon but reversed to close
poorly. This action, albeit not very impressive, was enough to put it at new highs for the year.
The S&P also reversed after trading higher. However, it
was unable to close in the plus column. It remains just above its recent minor
920 resistance level (which could now become support?).
So what do we do? Overall the sector action remains
positive. The majority of sectors are either in uptrends, breaking out or, at
the least, tagging multi-month highs. However, the indices appear to be stalling
at an overbought level. And, the media began celebrating the uptrend (e.g., a
bull Barron’s cover, CNBC bragging about 1,000 points up on the Dow). So, we
could be in for some corrective action. Therefore, probably the best thing to is
to manage your existing longs while putting together a potential buy list.
Looking to potential setups, Tol Brothers
(
TOL |
Quote |
Chart |
News |
PowerRating), in the strong
homebuilders, still looks like it has the potential to continue its uptrend out
of a pullback/TKO.
Random Thoughts
Many of the gurus that use esoteric methods have been
calling for a top lately (remember, predict early and often!). Therefore, a
correction that draws in their followers followed by a turn back up could create
a “knockout” that could help fuel the next leg.
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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