Why I’m betting on a shakeout and then a strong Q4

Timothy J. Truebenbach is the President of True Capital Management and
general partner of True Capital Partners LP, a hedge fund. He uses a
disciplined model that trades on the intermediate-term time frame. For a
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The
market is showing weakness as it has declined to key areas of support.

 The NASDAQ, for example managed to hold above its 200-day moving
average with further support around the 2,055-level.  

Piling a ton of money into
the market right here might not make the most sense.  One of the biggest
problems we have seen has been the enormous volume into the recent decline.
 Additionally, we have seen sellers come for just about every group.  The
biotechs were the last to fall.

If you have money committed to the market right now, it’s probably not the best time to bail out.  For the
past year and three-quarters, the market has made a point of falling apart
when heavy accumulation looks ready to take prices higher and rallying when
blatant distribution rears its head.  We are also seeing good strength out of
a several different names that have yet to get hit.  Google
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and Apple
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are a couple of stocks that have held up amid the
selling.

Historically, healthcare and
biotech stocks have done well in rising-rate environments.  You only have to
look back towards the end of the 1990s to see a recent example.  For this
reason, biotechs are a good place to start shopping as we begin the fourth
quarter: historically a strong period for the stock market.

Despite the recent trading
action, the market remains locked a fairly tight trading range.  The NASDAQ
range lies between 2,055 and 2,200.  The S&P 500 range lies between about
1,183 and 1,245.  If we break down, it may be another story, but I would bet
on a shakeout below support rather than truly trading lower in the months
ahead.

Tim Truebenbach