Proceeding with caution
This week’s trend analysis shows further weakening in all the major indices. While the intermediate and longer-term trends are still showing green – except for the consistently underperforming Dow Industrials, which is now back to all red – the balance has shifted currently in favor of a more negative status.
Given the market’s recent overall strong performance, especially in the NASDAQ and Russell 2000, there’s plenty of room on the downside for any correction. For example, a drop from here to about 1180 and 2000 on the S&P500 and NASDAQ, respectively, would still be consistent with a sideways consolidation in the long-term uptrend that began in October 2002.
Consequently, I’m lowering some of my downside put-selling price targets on many of the stocks I’m following, as well as focusing more on stocks and sectors that have been the strongest recent performers. Some that I’m currently watching closely include Aqua America (WTR), Chubb Corp. (CB), Baker Hughes (BHI), GATX Corp. (GMT), Lowes Corp. (CG), Office Depot (ODP), Papa John’s (PZZA), and Schlumberger (SLB).
