A Game Of Clues

Random Thoughts

The indices pulled back a bit on Wednesday. They were due for a breather. So far, the overall market is still looking good. Internally, things were a little mixed though:

The Trannies continued to plow ahead, gaining nearly 1%. This action keeps them at all-time highs.

Other areas such as Defense and Drugs managed to close at new highs too.

There was some weakness though.

Many areas pulled back like the overall market but so far, they appear to be just that-pulling back.

The Semis where hit fairly hard.

There were a few debacle de jours here and there-e.g. in the aforementioned Semis. Trading is a game of clues. If we start seeing a lot of these with additional signs then it might be cause for concern. For now, just make a note of this.

Overall, in spite of some pockets of weakness, things still look pretty good.

So what do we do? As I have been preaching, as a pullback player there’s not a lot of new action that should be taken until the market pulls back. Therefore, now that the market is beginning to pull back, start looking to add on the long side. I’m seeing setups in the Energies and Alternate Energies at this juncture. Since Crude had been a little weak as of late, I prefer the Alternate Energies. My reasoning is that the Oil based energies are likely more correlated to the underlying commodity and the Alternate Energies can trade more on emotions-the promise of the future. On a continued overall correction we will likely see a plethora of setups in a variety of areas. So, start putting together your momentum watch lists (or pay me to do it for you). As long as the market remains near new highs, I would avoid the short side for now. Regardless of what you do, make sure you wait for entries and honor your stops once triggered

Futures are firm pre-market.

Best of luck with your trading today!

Dave

P.S. Chart show today! If you aren’t busy saving lives, building buildings, repairing transmissions, or doing other great things, stop by. I have a few things to cover but the main focus of this week’s show will be on you. So bring your questions and favorite stocks selections. See Announcements to sign up.