It’s been mighty quiet at the blog here for the past few weeks but more frequent posts will resume now! I’ve been dealing with some personal stuff and spent nearly two weeks over in Lake Chelan in central WA. I’m recharged and ready to go!.. as is this market. Unfortunately that direction appears to be down in the coming weeks which I’ll get into in more detail in a bit.
To recap:
In my report on Aug 10th titled "Volume Reveals Rally May Be Weakening As Indices Clear Key Resistance", I highlighted the fact that the Nasdaq was weakening after running up more than 10% in a month.
"The Nasdaq is now up more than 10% in one month as it approaches big, bad resistance of the 200 day moving average. If it does test that level, and I think there is a very good chance that it will, it’s time to lock in profits and get very conservative .. The easy money of this rally has been made, so any further spikes up from here will offer an opportunity to lock in some profit and/or initiate a few short positions. If you’re not a shorter term trader it’s going to best to just lock in much of your profits and sit tight in cash for a few weeks."
The Nasdaq did end up testing that 200 day moving average and actually moved above it for a brief time as volume continued to diminish. That was a good time to lock in some hard earned profits and/or begin hedging your bets a bit.
In that report I also said that ".. 2350 is the new line in the sand for the Nasdaq. A close below this level with heavy volume would indicate significant weakness and put the Nasdaq back in danger of testing the lows of this correction."
Well, last Thursday that line in the sand was breached with heavy volume so we find ourselves in a position where the indices are likely to test the lows of this correction.
The first sign of potential trouble didn’t occur on Thursday though, it showed up in a high volume reversal on Tuesday. I sent the following note to my premium members that evening:
"Today was the first day of trading with significant volume in a few weeks and the technical action wasn’t pretty. I talk a lot about the significance of high volume reversals in the video presentations I do for you with individual stocks but the significance is just as great in the indices. The Dow nearly touched a gain of 250 in the morning before wiping away that entire gain and then some by the close as institutions used the rally to dump some positions. That kind of action typically leads to further deterioration ahead, so we’ll need to keep a close eye on how this market responds to today’s weakness in the days ahead. Another big distribution day or two could spell big trouble for this market as we move into a historically weak month for the market."
It’s important to be extremely cautious now with any bounces from here offering another chance to move more to cash and initiate short positions.
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::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Banks – SE: 12.00%
2. Banks – Pacific: 7.30%
3. Banks – Mid Atlantic: 6.85%
4. Surety & Title Insurance: 6.70%
5. Major Airlines: 6.50%
6. Tobacco Products: 4.65%
7. Semiconductor – Memory Chips: 4.10%
8. Home Improvement Stores: 3.75%
9. Banks – Midwest: 3.60%
10. Specialty Retail: 3.25%
– Top 10 Worst Performing Industries For the Week –
1. Silver: -16.40%
2. Steel & Iron: -15.90%
3. Heavy Construction: -15.40%
4. Gold: -15.30%
5. Industrial Metals & Minerals: -14.50%
6. Copper: -14.00%
7. General Contractors: -13.95%
8. Farm & Construction Machinery: -13.50%
9. Communication Equipment: -13.30%
10. Printed Circuit Boards: -13.05%
– Top 5 Best Performing ETFs For the Week –
1. SPDR Regional Banking (KRE) 5.70%
2. HLDRS Regional Banking (RKH) 3.40%
3. SPDR Retail (XRT) 2.70%
4. SPDR Financials (XLF) 1.65%
5. iShares Home Construction (ITB) 1.30%
– Worst 5 Performing ETF’s –
1. Market Vectors Coal (KOL) -18.10%
2. Market Vectors Steel (SLX) -15.20%
3. SPDR Metals & Mining (XME) -14.60%
4. Market Vectors Gold Miners (GDX) -13.90%
5. iShares Brazil (EWZ) -13.30%
::: Upcoming Economic Reports (9/8/2008- 9/12/2008) :::
Monday: Consumer Credit
Tuesday: Pending Home Sales, Wholesale Inventories
Wednesday: Crude Inventories
Thursday: Export/Import Prices, Initial Claims, Trade Balance, Treasury Budget
Friday: PPI, Retail Sales, Business Inventories
::: Earnings I’m Watching This Week :::
Tuesday: Aerovironment (AVAV), ARCSIGHT (ARST)
Thursday: Lululemon (LULU)
A second topic, perhaps of interest to all, Tate.
With the markets pointing downward this coming week, will the Ultra-short products come to the fore as a lower-risk means of trading in this bear condition?
Perhaps Monday will not be representative of what the charts indicate, what with the bailouts of the Macs announcement today.
There could be a false rally for a few hours to begin the week, but sometime during the week, the ultra-shorts may be worth watching closely.
sure the ultra short ETF’s can be a good diversified way to hedge with some leverage.. of course options are an “option” as well 🙂
Yes, very often a news driven day can be discarded particularly in the early hours of trading. It will be important how we close tomorrow and the following day. The trend now is certainly down though and any bounce up is going to provide me with some exit points on longs and entry points on shorts.