Swim Against The Falling Tide Or Go With The Flow?

Random Thoughts

The Ps dipped below the bottom of their trading range but promptly reversed to close well and in the plus column. The range held, so all is good in the world? Unfortunately, it is not that simple. I think the S&P has once again masked what’s really happening internally. Let’s take a look at the other indices before we get into that.

The Quack bounced. So far though, it appears to be just that—a bounce. The ¾%+ gain doesn’t even make up the prior day’s loss. The slide appears to remain in place here.

Ditto for the Rusty.

Let’s look at the sectors.

Drugs ended off their worst levels but in the minus column nonetheless. So far, their slide out of a First Thrust remains in place.

Health Services ended off their worst levels but in the minus column.

The Transports also ended lower but off their worst levels. It is important for these levels to hold.

Aerospace/Defense sold off fairly hard. Any additional weakness would be concerning here.

Areas that have been in serious downtrends such as Software, Internet, and Biotech bounced with the Quack but like the Nasdaq, they too still appear to be in trouble.

Now for the good, well, sort of:

The defensive issues– Foods, Tobacco, Utilities, and the Energies–remained strong.

Selected REITs hit new highs.

Industrial Metals & Minerals broke out to one-year plus highs.

I’m not sure you can build a bull market on defensive issues combined with a miscellaneous sector or two.

Overall, it wasn’t really that great of a day. I don’t think much has changed. It is good to see the Ps find support but I’m not sure that in-and-of-itself is enough to mitigate the damage that’s already done.

So what do we do? My 2014 theme and mantra of good stock picking and letting portfolio ebb and flow guide you continues. Let stops take you out of any longs that are sinking with the falling tide. Let entries trigger you in any great stocks that you think can swim against the tide or in shorts that you think will go with the flow. See the column archives and webinars for more on this.

Futures are firm pre-market.

Best of luck with your trading today!

Dave