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ChartSmarts for Wednesday 8/4/4


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#1 TTHQ Staff

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Posted 04 August 2004 - 08:24 AM

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Forewarned is Forearmed

Yesterday, I said, "I'm of the opinion that there is some correction that needs to occur. We can certainly see higher prices first, and said correction can certainly morph into a Bear Market, but the most likely path is to correct from here or a bit higher. That would likely bring the Bears back out, and set up the fuel for a real rally higher. "

It helps to have a good read on sentiment when we get into these confusing periods. Today's early indication has us down appreciably in the pre opening. Expect things to look and feel pretty ugly today. With some luck, we'll scare folks enough to make a good low.

DOW: The Dow looks like it's heading back to the old lows.

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S&P500: The futures are telling us that there's not much constructive about this pattern any more. We're back in a down trend on the S&P.

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NDX: The Nasdaq was surprisingly weak. I am still interested in this area, but until it finds a low, it's not a great Buy. I'm convinced that it will be, soon, however.

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QQQ: The Q's broke their uptrend and Doug was "Johnny-on-the-spot" and advised us to back away from the trade. Sometimes this game is all about risk control.

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HUI: The Golds have been acting well. I'm getting the funny feeling that even the Bulls don't believe in much more upside (I read about a lot of selling yesterday). I suspect that we're going to be surprised by the HUI's strength.

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IYR: I'm hoping that this will find a few more buyers today, so we can get short. Cross your fingers.

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HPQ: I'm with Doug, things look pretty iffy here. Let's look at HPQ later.

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MRK: I'm actually hoping that they bomb Merck with the rest of the market. I want to buy it cheaper. When things finally turn for real, this one ought to play well.

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XLF: The Financial Sector looks like it could be in longer-term trouble. Remember, leverage is the name of the game in this sector, and if it unravels, the downside can be shocking and fast. Let's short a break-down.

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NXG: Our Northgate was a star yesterday. I'd not be surprised by a little market based pullback. It's a pity that we have to snug our stop, but again, we have to control risk in this market. Fortunately, we've built a little cushion.

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Summary:
I've got a pretty good bead on the sentiment picture for this market, and I'm hopeful that we'll get enough pessimism built up to fuel a good rally soon. One thing to remember is that we are at a delicate juncture. We're in a Cyclical Bull Market, but this could change fairly quickly over the coming weeks.

If we do go into a new Cyclical Bear Market, those who trade nimbly will be rewarded. I'll point out that during the depths of the last Bear, Doug was regularly picking winners...sometimes the few that were up. More than once his picks were at the top of the "Top Gainers" list when everything else was down. We did quite well while most stock investors were getting badly bagged.


Be Well, and Trade Smarter Than the Average Bear!
Mark, Doug, and Holly
-The ChartSmarts Team


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