Why The Upside Could Be Limited
On Friday, the Nasdaq opened stronger but quickly found its
high and bean to work its way lower. However, if found its low by mid-day and
then generally worked its way higher for the remainder of the day.Â
This action has it closing well and keeps it above its 50-day moving average. 2100 remains resistance here.Â
The S&P put in a similar performance but wasn’t
nearly as strong.
This action also keeps it above its 50-day moving average 1140-1160 remains resistance here. Â
So what do we do? The market remains below a
tremendous amount of overhead resistance. This action is confirmed by the fact
that many sectors have shown similar action. Also, the VIX hit multi-year lows
on Friday. As mentioned recently, low readings here (on a relative basis)
are a sign of complacency. Therefore, I think the upside could be limited.
Considering this, keep positions light on the long side and be willing to scale
out as resistance is approached. On the short side, metals & mining looks
poised to resume its recent “meltdown.” Also, interest rate sensitive
areas such as the banks, homebuilders, and the REITS look poised to continue
their slide out of pullbacks. On a related note, financial services have also
been in a strong downtrend as of late.
As far as setups, Phelps Dodge
(
PD |
Quote |
Chart |
News |
PowerRating), in the weak metals
& mining-copper sector, looks poised to resume its recently slide out of a
big picture topping formation.Â
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
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