Sometimes The Best New Action Is No New Action

Random Thoughts

Tuesday scores as a bummer.

The Ps (S&P 500) tried to rally but came right back in. This action has them stalling short of all-time highs and it also creates an outside day down. After all was said and done, they managed to close down less than ¼% so it wasn’t a washout. The way they traded suggests that they have lost some short-term momentum. Speaking of momentum, net net, they haven’t made much forward progress in nearly a month.

The Quack (Nasdaq) had a tiny rally before turning down. Although it closed off of its worst levels, it still lost just over ½% nonetheless.

Yet again, the Rusty (IWM) remains the real concern. It sold off fairly hard out of a First Thrust, losing nearly 1% on the day. So far, this action keeps its bigger picture double top intact. For those keeping score, it is back into the negative column for the year.

The sector action has begun to deteriorate.

Energies ended lower. Net net, they haven’t made any forward progress in over a month. Continue to keep an eye out for a potential Bowtie down here.

Shipping has lost steam. It looks poised to continue lower out of a First Thrust Formation.

Chemicals have also lost momentum.

Unfortunately, other previously stronger areas like the Semis are also losing momentum.

Tobacco, another previously strong area, was anything but smokin’ yesterday. It lost

Other areas that I have been concerned about such as Drugs overall and Biotech remain concerning, with the latter losing over 2 ½% on Tuesday.

I can go on and on but I don’t want to bum you out.

The Gold & Silver stocks got whacked pretty hard. So far though, I still think a bottom remains in place here. In fact, this could be a buying opportunity in selected issues but only on entries. It’s never an easy ride in precious metals.

Metals & Mining overall came back in but so far, their major breakout remains intact.

The Trannys did manage to close at new highs.

So what do we do? The loss of momentum, especially in the smaller cap issues remains concerning. I don’t think you should rush out and sell the farm just yet. DO honor your stops on existing positions just in case. And, begin keeping an eye out for a short or two just in case things deteriorate any further. The one thing that we will have to remember is that we are now in the middle of summer. And, as you know, summers can be choppy. Last night things looked really ugly but this morning the S&P futures are up sharply in a “what, me worry?” fashion. Sometimes the best new action is no new action. Other than the aforementioned Gold & Silver stocks (and only on entries!), I’m not seeing a whole lot of interesting new setups just yet.

Best of luck with your trading today!

Dave