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Analyzing Four Big-Cap Market Leaders


Three of these major players are still below key inflection points, signaling that further repair work is needed.

The first few days of 2010 continued the hot streak of the fourth quarter 2009, giving many investors a giddy feeling about their portfolios. But the euphoria was short-lived, as a decent pullback set in and started whipsawing trend traders. Instead of dying the death of a thousand nicks and cuts, I choose to step aside and watch the short-term gladiators fight it out. Although the picture is currently as clear as mud to me, I can't deny that shorter-term traders who can nimbly bounce in and out of this market might be taking some gains home.

Since this short-term game isn't my style, I've used this ensuing "wait and see" time period to scan through thousands upon thousands of charts. Doing this scan almost daily has raised my conviction that the market still has little direction, and that watching the big-cap leaders will give us a tip-off to which direction we'll finally break.

I want to take a look at four big-cap market leaders, as it's my conviction that they'll pave the road to our next destination. As the charts will tell us their story, you'll see that three out of four of these major players still are below key inflection points, signaling to me that further repair work needs to take place for the US markets to roar higher.


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In early January 2010, IBM (IBM) took out the summer 2009 highs which were around $130 and change. It's no mere coincidence that this pop matched the 10-year high set back in 2000. Just as quickly, IBM reversed and dropped a quick 12 points in a matter of days. The chart above shows two key trend line breaks for IBM, and neither one has yet to be recovered. The key level around $129 will be a tell for the overall health of the current market. As a tech giant that's held by an abundance of mutual and pension fund managers, it's impossible for this elephant to step in the tub without all boats rising. Keep an eye on the nature of any move through these levels.

Goldman Sachs

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In early September 2009, Goldman Sachs (GS) broke to new 52-week highs, but ran into major overhead resistance. Instead of powering ahead Goldman started a clearly defined downtrend which it currently finds itself mired in. Looking at the chart, it's easy to see the channels Goldman has formed the past 10 months. Remember that these channels offer both support and resistance, and the ease at which it breaks into new territory will be a giant marker as to the battle being waged in the overall market. The first area where we go to war will be $157, and as we currently find Goldman bumping its stubborn head on some longstanding resistance, we'll need to gauge if it's ready to run higher or needs more time at the current levels.


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For years Intel (INTC) has seemed to muddle around, never giving us a clear beacon as to its intentions. Pull back a chart to 2002 and you'll see that Intel has never really gained traction after the tech bubble meltdown. As those subscribers to my service hear time and again, buy-and-hold investing can be one of the most detrimental decisions you can ever make for your long-term financial health. While Intel is virtually net zero in the last eight years, there have been opportunities to trade it well. Currently, the company has built a seven-month base with support at around $18.80. While I'm not currently inclined to take a position in Intel, if it breaks above the congestion at $20.60 it would bode well for its future prospects. I'd also like to see similar action from the other names I'm highlighting here.


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Compare the chart action in JPMorgan (JPM) to that of Intel above. While both have formed multi-month basing patterns, JPMorgan is clearly struggling to find its footing. From a high in late October of $47.00, JPMorgan has done nothing but struggle to remain with its head above water. Granted, the continuing mess exposed in our financial institutions has weighed heavily on the price action of JPMorgan, so a trader would be in a dangerous position should he or she fail to heed these signals. Until we see all of these companies repair their broken charts, I'll be looking at any major market move with a cautious eye.

See how Quint uses these lessons and more as he trades Minyanville's FlexFolio. He's beating the S&P 500 by 27% since inception. Take a FREE trial today for access to the portfolio, interactive strategy sessions and trading alerts with each trade. Learn more.
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