Why It’s Not Time To Buy
On Thursday, the Nasdaq chopped back and forth in a narrow range.
The S&P’s also traded back and forth but were generally
stronger and they managed to close in the plus column.
In the sectors, although some bounced, overall the action
wasn’t very good. Retail sold off especially hard. This action has it breaking
down out of it high level sideways trading range–suggesting the potential for a
top. Many other areas, especially tech, sold off to hit multi-month lows. This
includes (but not limited to), Internet, software, defense, and
semiconductors.
So what do we do? The market remains oversold.
However, this, in and of itself isn’t reason to buy. I still don’t like the
action in the sectors. Many look like tops. This is especially true in
technology. Therefore, on the long side, sit on your hands. I think if missing a
bounce play is the worst thing that happens to you, then you’re doing alright.
On the short side, trail your stops on existing positions and start putting
together your list for new ones. Watch for transitional patterns (i.e. early
trend) in Defense, chemicals, Internet, software, and retail (to name a
few).
As far as setups, Lockheed Martin
(
LMT |
Quote |
Chart |
News |
PowerRating) in the
aforementioned weak defense sector (and let’s face it, what good is a weak
defense?), looks poised to continue its slide out of a pullback.
Best of luck with your trading on Friday!
Dave Landry
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