Why Tuesday’s Action Is Concerning
On Tuesday, the Nasdaq rallied in early trading but quickly found its high and
began to trade sideways until mid-day. It then sold off hard for the
remainder of the day. This action has it closing poorly and puts it all the way
back to its recent breakout levels.
The S&P put in a similar performance. Â This action
pushes towards the bottom of its short-term sideways trading range.Â
In the sectors, most of tech still looks pretty good
with areas such as software, Internet, and telecom appearing to be only pulling
back in their strong uptrends (so far). On the downside, the banks sold
off hard. They now look like a failed pullback (potential top). Retail is now at
the bottom of its short-term trading range. The energies and energy related
stocks appear to have topped and are breaking down. Other commodity areas such
as metals & mining (including gold & silver) also appear to have topped
and are also breaking down.Â
So what do we do?  The Nasdaq has now
given up all of its recent breakout. The S&P is stuck in short-term sideways
range. There are some sectors outside of tech (and commodities) that are
beginning to break down. This action is obviously concerning. Now is the time to
honor your stops on existing longs and wait for things to settle out before
establishing new ones. Should the market continue to slide, we will likely see
transitional patterns (early trend shorts) setting up soon.
No setups tonight.Â
Best of luck with your trading on Wednesday!Â
Dave Landry
P.S. Reminder: Protective stops on every trade!
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