Stocks: A top or just a pause?
Although the market has begun pulling back after becoming overbought as it tested important upside resistance levels, there’s no reason to assume – yet – that the current uptrend has ended.
Unless or until the weekly trend analysis turns negative (it’s currently positive for most markets except, notably, the iShares Japan and Emerging Markets indices) and the S&P 500 falls below the critical 1275-1285 support level, I’ll view downside action from here as consolidation within an ongoing uptrend.
New positions
American Axle & Manufacturing Holdings (AXL) – Last Thursday I sold some October 25 puts on AXL as it sold off on an analyst’s downgrade:
AXL appears to have long-term support at the 13-15 price level.
American International Group (AIG) – Last Friday I sold some October 65 puts on AIG as it dipped to the 65 level:
AIG has been performing well lately, and while short-term overbought (like most of the rest of the market) it appears that it may have higher to go over the intermediate term.
Watchlist
New (and recently re-added) additions to the “upside strength” list include Bank of America (BAC), Citigroup (C), Diebold (DBD), General Mills (GIS), and Tribune (TRB).
New (and recently re-added) additions to the “oversold” list include Alcan (AL), BHP Billiton (BHP), BorgWarner (BWA), Caterpillar (CAT), ConocoPhillips (COP), Fluor (FLR), Goldcorp (GG), Hershey (HSY), Norfolk Southern (NSC), and William Wrigley Jr. (WWY).
