Don’t Forget To Look Under The Hood

Random Thoughts

The Ps put in a solid day. This action has them approaching the overhead resistance (aka supply) level, circa 1825. So far, it only looks like a deep retrace. Obviously though, if it keeps retracing then we are back to the business of making new highs.

The Quack also had a solid day. If fact, it is now less than 1 ¼% away from multi-year highs.

A few big up days would put the Ps and Quack back to new highs. The problem is that “V” shaped recoveries at high levels are hard to sustain. The new leg begins from an overbought condition. I suppose it would be a good problem to have though. I’ll walk you through this on Thursday.

As usual, take things one day at a time.

The Rusty remains most troublesome. The retrace here has been somewhat anemic, especially when compared to the aforementioned indices. And, the Bowtie/First Thrust down remains intact. What’s concerning is that it is a much better representation of what’s truly going on under the hood.

Speaking of which, the database continues to pump out a plethora of potential shorts and virtually no meaningful longs.

Most sectors still look questionable at best. There are a few standouts though.

Drugs made it back to new highs.

And, selected sub-sectors such as Pipelines within Energy and Memory Chips within the Semis are at or near new highs.

Gold blasted higher. You’re welcome! Finally, the process has become an event.

It’s just not enough to get excited about just yet. Again, most areas still look questionable. Manufacturing, Banks, Insurance, and Finance still look like they have the potential to make a new leg lower. Just make sure you wait for entries on new positions because the rising tide has been lifting the boats here.

So what do we do? It’s too late at the moment to establish new positions in the Golds. Therefore, look to take partial profits here and trail your stops higher. If this turns into the real deal, half of a position will be plenty enough. If these stocks return to their old glories, we could see gains of several hundred percent. And, if  don’t, a profitable trade overall is much better than a poke in the eye (more on this in Thursday’s chart show). Continue to avoid the rest of the long side for now. The market remains overbought and it still looks somewhat dubious.

Futures are flat pre-market.

Best of luck with your trading today!

Dave