To The Chicken Littles: The Market Will Have To Die Another Day

Random Thoughts

The Ps (S&P 500) didn’t set the world on fire but they did manage close up a ¼% for the day. Better than a poke in the eye I suppose, especially when you consider last week’s side. At the least, the index is stabilizing-for now. It is still right below its well watched 50-day moving average. Again, there’s nothing magical about this average but it can provide a great point of reference and it can help to keep you on the right side of the market. The good news is that the moving average still has a positive slope. The bad news that the Ps remain stuck in the middle of their sideways trading range—pretty much where they were way back last November.

The Quack (Nasdaq) spring boarded off its 50-day moving average for a gain of well over ½%.

The Rusty (IWM) had a decent day too. It also gained well over ½%. So far, its longer-term uptrend remains intact. You now me though, I’d sure like to see some new highs sooner rather than later. We are only a couple of percent away. As I have been preaching, it’ll be hard to have a bear market while the Rusty remains at or new highs.

The Dollar (UUP) ended a smidge higher. Reiterating from Friday’s column/newsletter: So far, its longer-term uptrend remains intact and it has only pulled back as of late. Continue to watch for potential emerging trend patterns (e.g. Bowties). If, or should I say when, the bubble does pop, there will likely be some shock waves sent into other markets. Commodities, for instance, being Dollar denominated, will likely get a serious boost. Again, it is all intertwined but keep in mind that inter-market technical relationships only matter when they matter.

Bonds (TLT) bounced to get back above their 50-day moving average. Again, there’s nothing magical about the moving average but it is good to Bonds stabilizing a bit. The good news is that rates are lower than they were before the market had its rate worry sell off. This is another intermarket relationship that could have an impact on stocks. Again though, it will only matter when it matters. Stay tuned.

The sector action remains mixed. Some are bouncing off of their 50-day moving average, looking like they want to go back to their old highs. Others are hovering near the bottom of their trading ranges, trying to decide whether or not to jump (see Friday’s column).

In the good news department:

Drugs bounce back nicely out of their recent pullback. So far, the trend remains intact here.

Retail also appears to be rallying out of its pullback.

The Semis came back with a vengeance, gaining over 2% for the day. This action suggests that they want to go back to challenge their recent short-term double top.

Retail also remains in a longer-term trend and so far, it has only pulled back.

Lincoln once said that the great thing about the future is that it comes at you one day at a time. That reminds me, “Mrs. Lincoln, other than the shooting, how was the play?” Sorry, too soon? Anyway, Lincoln’s right, trading, like life, needs to be taken one day at a time. Just a few short days ago it looked like things were coming unglued. The “I told ya so”s and Chicken Littles were quick to claim victory like it was a done deal. Well, sometimes the market just has a couple of bad days. Predict early and often, I suppose.

So what do we do? In the last few Dave Landry’s The Week In Charts, I preached to do what you always do—Follow Your Plan. This is especially true when things get a little iffy. Don’t bet me wrong, all isn’t rosy out there but it’s certainly not the end of the world—nor can you see it from here. If things do deteriorate then so what. Stops will take us out. Sure, I’ll drop and F-bomb (or three) but I’ll then shout NEXT! and get on with my life. Entries will help to keep us out of new stinkers. And, on downside follow through, I’ll dust off my shorting patterns. For now though, I’ll keep them shelved.

Best of luck with your trading today!

Dave

PS Don’t forget to watch last week’s Dave Landry’s The Week In Charts. I flesh out a lot of the above. Also, it’s worth 300 bucks in savings.