Why I Still Think The Market Could Be Headed Lower
On Tuesday, the Nasdaq traded back and forth until finding
its low around mid-day. It then rallied throughout the rest of the day.
This action puts it just above its recent pivot point and has it closing in on
its 50-day moving average (the red line below).
The S&P put in a somewhat similar performance. This
action puts it slightly above it prior swing high.
So what do we do? I’m not sure a whole lot has
changed. I’ll admit that the indices are trying to push through minor
resistance. However, this action leaves them even more overbought. I’m basing
this on low readings of the 3-day average of the NYSE TRIN and quite simply,
price itself–the media was even touting the fact that the Dow had
risen over 300 points over the last 4-days. True, there are some sectors such as
Internet and selected software that have been improving as of late but the
majority still remain in either downtrends or topping formations. Also, as
mentioned recently, even if the
indices continue to rally, they still have a tremendous amount of overhead
resistance to plow through. Therefore, for now, I still believe that we should
focus mostly on the short side. On the long side, about the only area that looks
interesting to me is gaming.
Looking to potential setups, Borg Warner Automotive
(
BWA |
Quote |
Chart |
News |
PowerRating),
mentioned Monday night and in the weak auto parts sector, still looks poised to resume its accelerating downtrend out of a
pullback.
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
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