I hope everyone had a great weekend and is ready to get back to work next week.
This market just refuses to give anything back. Every little intra-day dip is being bought without any fear. A little too complacent in my opinion. Volume has just been not very impressive the last few weeks. However, volume or not, the points are racking up on the SPX and DOW and we continue to march upwards. There are still heavy resistance levels overhead and this week's news should provide some direction. April unemployment data is coming out, and it will have to be absolutely disastrous numbers to even make a dent in this market. The bigger news is the stress test results. The fact that the release of the results was postponed on Monday is not a very good sign - but that's just my opinion.
Looking through charts over the weekend, I could not help but notice a divergence in chart patterns. No longer do all charts look the same as has been the case for the last, oh I don't know eight/nine months. Many stocks are breaking out either from a cup and handle, or forming the right side of a cup. Last Friday, many energy, commodities, ags and steel names ripped higher on strong volume. I'll definitely be keeping an eye on these sectors for longs the coming weeks. The only problem I have with breakouts at this stage of this rally, is that we have come too far too fast and personally, I will not be chasing this strength. Mistake? Maybe, but I'd rather miss out here and let these stocks consolidate until I find my setups.
On the other end of the spectrum, bios are looking very precarious and teetering on the edge of collapse. Almost every bio stock retreated noticeably on Friday on heavy volume setting that sector up for continued weakness. Many housing, financial and real estate stocks are setting up for short opportunities this week as well. I believe some of the regional banks may be in trouble, and all you have to do is look at some charts of the weaker banks to see how they are setting up for more downside, e.g. ZION, RF, STI. Watch this sector very closely for short opportunities.
It is clear though that the leaders are emerging and setting up for continued strength as/if we move out of this bear market. At the same time, there will be lots of weak companies that will setup very nicely for short opportunities.
Stay vigilant and take profits while you can. This is one tough market to figure out. Good luck next week.
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It's a tough market because of penny wise and pound foolish. However, buying and holding everything at this level makes me uncomfortable. Waiting for a pullback, but the stock is not pulling back from the level where I first saw it. It is pulling back from a higher level. sigh ...
ReplyDeleteLot of people were/are caught off-gaurd by the strength of this rally (myself included), which has to be respected. A real pullback will define the character of this rally as a new bull market or bear market rally. Either way, it should setup some great opportunities.
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