Support Holds But Let’s Not Start Kissing Each Other Just Yet

Random Thoughts

Tuesday was yet another day where the Ps looked okay but the rest of the market didn’t seem so great.

The Ps had a decent day, gaining well over ½%. This action has them pushing back into their short-term high level trading range—aka supply. Getting through this supply will likely be tough. Markets can do whatever they want though. So, follow along and take things one day at a time.

The Quack tailed lower before reversing to close well off its worst levels. This action has it probing below the February lows and so far, reversing to hold above them. It also has it almost kissing its 200-day moving average. Speaking of kissing, let’s not start kissing each other just yet. Yes, support has held but that’s not reason enough to consider buying a market.

The Rusty (IWM) probed well below its 200-day moving average and neared its February lows but it reversed to close well and in the plus column, up .41%. So, it too held a support level.

The action in the indices is suggesting a bounce. After digging through a couple of thousand stocks and several hundred sectors, I just can’t get excited about a bounce. In spite of the Ps (S&P 500) hanging in there, the vast majority of stocks remain in downtrends.

 

Most of tech remains in a serious downtrend. Draw your arrows on Biotech, Drugs, Internet, and Software.

The Semis remain the strongest on a relative basis—remember though, you can’t live off relative performance. They too have lost steam though. On a net net basis, they haven’t made any forward progress in over 6 weeks.

There are a lot of other downtrends and questionable areas out there.

Conglomerates, Financials, Banks, Manufacturing, Retail, Consumer Non-Durables, and others remain below multiple peaks.

The Transports remain sideways at best, trading at levels that they were late last year.

Yet again, about the only thing that remains in bona fide uptrends are the defensive issues such as Food, Tobacco, Energies, and Utilities.

So what do we do? The market is in bounce mode but so far, I think it’s just that “bounce mode.” Unless you want to fire off a daytrade (which I would discourage), this isn’t a move that will be tradable. I’d much rather position myself where I have the potential to make a short-term gain and a longer-term gain. And right now, I’m not seeing many opportunities. I am watching the defensive issues for possible opportunities. I’m just not really seeing a lot to get excited about here just yet. On the short side, I’d continue to focus on the weaker tech areas. I also think if the market cracks, Financials will lead the way. Therefore, keep an eye Tech and Financials for shorting opportunities but don’t be a hero. Wait for entries just in case they bounce and keep in bouncing. Warning, preaching just ahead: No matter what you do, honor your stops once triggered.

Futures are firm pre-market.

Best of luck with your trading today!

Dave