Why I’m Looking To Get Short Again

March 14, 2003
Dave Landry

On Friday, the Nasdaq opened firmer, pulled back and began
to rally. However, it formed an intraday double top in early morning trading
and sold off. It found its low early in the afternoon and then traded sideways
for the rest of the day.

This action has it stalling out right at its recent
highs/50-day moving average/200-day moving average.

The S&P also reversed after tailing higher.

This action has it stalling out in the middle of its recent
trading range.

The top of
its recent trading range and its 50-day moving average remain resistance levels.

The Dow stalled out near its recent highs/short-term
resistance–circa 8000.

Looking to the sectors, many are now set up as pullbacks
from lows.

Broker dealer is stalling out near the bottom of its recent
trading range.

The banks have formed a somewhat similar pattern.

Ditto for insurance and other financially related stocks
(e.g., asset management).

Some non-related sectors such as telecom have formed
similar patterns.

Defense is bouncing, but so far, only appears to be setting
up as a pullback from lows.

The list of sectors in downtrends that are setting up as
pullbacks from lows goes and on. It includes (but is not limited to): gold,
transports, conglomerates, chemicals and auto parts. Even defensive areas such as foods look
poised to continue their downtrends.

So what do we do? The fact that the indices are
stalling out at resistance, combined with the stalling action within many sectors
themselves, suggests that the rally is over. Further, as one would expect, tonight
(Friday), I’m seeing a plethora of shorts setting up. Therefore, look to
re-position yourself on the short side. And, if you took index trades
based on the recent signals (see Wednesday’s archive), look to exit them.

Looking to potential setups, Borg Warner
(
BWA |
Quote |
Chart |
News |
PowerRating) in the
aforementioned weak auto parts sector (a), looks poised to resume its meltdown
out of a First Thrust-like setup.