Not looking so good
Last week’s complete reversal (and then some for most indices) of the previous week’s gains in the market was like a torpedo blow to the recently all-positive weekly trend pictures, which are all now either mixed or negative. For example, the trend spectrums reflecting the currently “active” identifiable trends for the NASDAQ and S&P500 indices are all red (negative), while those of the Russell 2000 and DJIA – which have recently been the strongest performers – are now mixed at best.
A further technical concern is that the reversal in the Russell 2000 was accompanied by a negative divergence on its price oscillator (see below), suggesting a “top” of some sort. Having had such a good run since last October, the RUT could be seen as having plenty of room to correct on the downside.
The DJIA is in the best shape, and it wouldn’t surprise me to see further probes at its all-time highs on any bounces here. However, the bottom line is that the market may well have begun an (overdue) intermediate-term (or longer) downtrend, and I’m going to ease up accordingly on the aggressiveness of my put selling.
New positions
No new positions this week, even though there are increasing numbers of “oversold” opportunities. This is partly because I’ve become more cautious on the market, but I also want to wait to see how this coming options expiration week plays out.
Watchlist
Not all stocks are breaking down – some of those showing up on this week’s “upside strength” scans that I’m watching include Anheuser Busch (BUD), Coca Cola (KO), General Motors (GM), Walt Disney (DIS), Estee Lauder (EL), Ingersoll Rand (IR), Kimberly Clark (KMB), Newell Rubbermaid (NWL), Nippon Telegraph & Telephone (NTT), NiSource (NI), and Universal Health Services (UHS).
Stocks of interest appearing on this week’s “oversold” scans include KB Home (KBH), Kinder Morgan Energy Partners (KMP), and Wrigley (WWY).
