Follow The Bouncing Ball

Random Thoughts

Monday’s bounce didn’t feel like much of a bounce. Yes, the Ps gained .82% to make back most of Friday’s loss but the market didn’t feel that strong.

The Quack gained just over ½%.

I think the Rusty, up just over ¼%, was a true representation of what actually happened internally.

Not much really changed in the sectors.

Weaker tech areas such as Software, Drugs, Biotech, and Internet bounced but remain in downtrends.

Stronger tech areas like the Semis bounced but so far, it appears that the damage has been done. They remain below a short-term sideways trading range.

Health Services, which recently broke out, then broke down, bounced but so far, it remains below a high level short-term range. You have to look at charts from a psychological perspective. Those who got sucked into the recent “all clear” are now faced with a loss. And, these “Johnny come latleys” are usually the first to bail at any sign of weakness.

Banks, bounced but so far, they still appear to have made a false breakout.

Many other areas that remain below multiple peaks such as Manufacturing, Retail, and Consumer Non-Durables also bounced but they still remain below their multiple peaks.

The Transports ended flat on the day. After recently making new highs, they have come back in. The Major Airs, which lost just over 1 ¾% on Monday, are weighing the sector down.

Financials bounced but so far, they remain in a serious slide.

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

Once again, we are in what could be the early phases of a rollover. My hope is that conditions drastically improve and I’m wrong. Maybe the Fed will throw some more gasoline on the flames and it will work one last time. You know me-take things one day at a time. And, believe in what you see and not in what you believe.

So what do we do? Monday’s bounce doesn’t change much. If anything, it helps to set up stocks that have been sliding as of late. Therefore, continue watching for shorting opportunities in weaker areas such as technology and the financials. On the long side, continue to look for opportunities in the aforementioned strong defensive issues. As usual, make sure you really like a setup before taking it. Now’s not the time to get too aggressive. Put on a short or two just in case the market rolls over. And, of course, not matter what you do, wait for entries and honor your stops once triggered—stop me if you’ve heard that before.

Futures are firm pre-market.

Best of luck with your trading today!

Dave