Uptrend not over, but resistance just ahead
The market’s strong performance last week again confirmed an ongoing uptrend, leaving only the CRB Index, Semiconductor HLDRS, Energy Sector SPDR, and Consumer Staples Sector SPDR ETFs with negative trend spectrums on the weekly trend picture. While a pullback or consolidation could be expected at any time, the strength that the market has demonstrated so far strongly suggests that the uptrend ultimately has further to go – the only question is “how much further?”.
Upside resistance levels may provide some clues, at least over the short term. For example, even though the DJIA reached new all-time closing highs last week, it still has yet to exceed its all-time intraday high of 11,908.50 made back on 01/14/2000:
At 1350, the S&P 500 is sitting right at one of its resistance levels, which also coincides with its current long-term linear regression trendline – and just above that the 1370-1380 area could pose a problem:
And the NASDAQ Composite is nearing important upside resistance at the 2330-2350 level:
New positions
Bank of New York (BK) – Last Monday I sold some October 35 puts on BK as it dipped down to the 35 level:
Like most other stocks in the banking sector, BK has been trending higher and – despite being short-term “overbought” – looks like it may have higher to go over the intermediate or longer term.
Statoil ASA (STO) – Last Tuesday I sold some October 22.5 puts on STO as it fell on continuing weakness in the oil sector:
Like the rest of the oil sector this looks like it may still go lower, but a bounce somewhere around here from oversold conditions wouldn’t be unexpected.
Watchlist
New (and recently re-added) additions to the “upside strength” include Amgen (AMGN), Cemex (CX), Citigroup (C), DuPont (DD)*, Eastman Chemical (EMN), Eli Lilly (LLY), SafeCo (SAFC), and Toyota Motor (TM).
No new additions to the “oversold” list this week, which isn’t too surprising given the market’s strength. I am watching many previously mentioned candidates for opportunities, however, particularly those in the energy and materials sectors (and some technology).
* I currently own some shares of this company.
