Why I Remain Constructive Towards The Market
On Monday, the Nasdaq dipped in early trading but quickly
found its low and rallied throughout the morning. It then consolidated its gains
for the rest of the day. This action has it closing well and at new highs for
the year.
The S&P put in a similar performance. It too is at new
highs for the year.
The VIX dropped to its lowest level in nearly a year.
Although it’s beginning to pull away from its 10-day moving average, it isn’t
stretched yet (i.e. more than 10%).
So what do we do? I like the fact that the market has been
generally starting weaker and finishing stronger. This is the type of behavior
that usually associated with bull markets (oops, did I day that?). Looking to
the sectors, the action remains overwhelmingly positive. In fact, I had to run
sector sorts to see what the weak sectors were because I couldn’t think of any
off the top of my head. Considering the above, I remain positive towards
the market. The only caveat is the low VIX. However, so far, I still think
momentum wins. Therefore, continue to focus on the long side but make sure you
are taking profits and trailing stops along the way.
Looking to potential setups, Business Objects
(
BOBJ |
Quote |
Chart |
News |
PowerRating),
in the improving software sector (a), looks like it has the potential to resume its
uptrend out of a pullback.
Trail ’em If You Got ’em
Tol Brothers
(
TOL |
Quote |
Chart |
News |
PowerRating) has moved nicely since first
mentioned (a). When blessed with a nice profit, make sure you trail a protective
stop (b).
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….. Your idea about the MAs narrowing, crossing and setting up in proper order sure is a good one. It makes flipping through charts a piece of cake; another great idea from your marvelous book….”
Grant C.Â
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