Why I Think The S&P Could Be In Trouble
Looking to the indices, on Friday, the Nasdaq sold off in
early trading. It then chopped sideways for the remainder of the day.
This action has it closing poorly and keeps it in a trading
range.
The S&P put in a similar performance.
This action has it closing poorly, closing below its 50-day
moving average and challenging the bottom of its trading range.
Looking to the sectors, financial related stocks such as
banks and broker/dealer sold off especially hard. This action has them breaking
down out of short-term trading ranges and could suggest that a top is forming
here. Internet finished lower and looks like it could be forming a head and
shoulders top. Software still looks like it has formed a top and has the
potential to continue lower. The semis managed to finish in the plus column but
remain in wide and loose trading range. Energy stocks, homebuilders and
utilities continue to sell off out of an pullbacks and/or inverted cup and
handles.
So what do we do? The fact that the S&P is
challenging the bottom of its trading range suggests that it could break down.
This is further confirmed by the negative sector action mentioned above.
Therefore, you might want to start putting together a list of potential shorts.
However, until we get out of the trading range, you might still want to keep
positions on the light side.
No setups again today tonight (Friday). Remain patient, we should see numerous
stocks setting up if the S&P breaks down out of its trading range.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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