Why I Remain Bullish But Think We Could Correct
Looking to the indices, on Wednesday, the Nasdaq opened
firmer but then chopped mostly sideways throughout the day. This action has it
closing right at the area it opened. I believe the candle people refer to this
as a “spinning top”–which suggests a tug of war between the bulls and
the bears (if you use candle stick charts and have an opinion on this, feel free
to email me). Nonetheless, it was enough to put the Nasdaq at new highs once
again.
The S&P continued to new highs but with less
vigor.Â
Looking to the sectors, many, like the indices themselves,
began to stall a bit and could be in the early phases of pulling back. The semis
were hit especially hard, but so far, this action only appears to be corrective
in nature. There were a few areas as such as software and telecom that managed
to do exceptionally well though. Gold finished higher after trading lower. This
action suggests that it has the potential to resume its uptrend out of a Trend
Knockout.Â
On the downside, major drugs appear to be stalling out in
their pullback and still look poised to resume their longer-term downtrend.
So what do we do? The market seems to be
firing on all 8 cylinders with all major indices making new highs on Wednesday.
However, I’m concerned about the fact that it is becoming very overbought. I’m
basing this on shorter and longer-term (e.g. McClellan Oscillator)
advance/decline readings and quite simply price itself. Also, the 3-day moving
average of the NYSE TRIN is also overbought and is showing signs of reversing.
In other words, this action sets up TRIN Reversal sell signal (as usual, if you
need rules, email me). Therefore, if you do look to buy, look to those sectors
such as the semis which have already begun to correct or focus on areas such as
gold that can trade contra to the indices. For the aggressive, or those looking
to hedge existing longs, you might look for a contra-trend trade (short) in the
indices should they show signs of weakness. However, don’t overstay your welcome
here since the longer-term trend remains up.Â
Looking to potential setups, Anglogold
(
AU |
Quote |
Chart |
News |
PowerRating), in the
aforementioned strong gold sector, looks poised to resume its uptrend out of a
“micro” cup and handle.
 Best of luck with your trading on Thursday!
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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