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Improvement in Market Leadership


Despite the continued grey cloud, the charts are actually starting to improve, most notably in recent market leadership.


Good morning, Minyans,

After some much needed consolidation on Monday we face another soft opening, which is fine as long as the selling doesn't get out of hand. We must remain patient while we get a feel for the general mood of participants but it already feels like many traders may be on hold until we see the jobs number on Friday, which will give us a better indication of what the Fed will do on the 11th.

Despite the continued grey cloud, the charts are actually starting to improve, most notably in recent market leadership. Stocks like Intuitive Surgical (ISRG), Monsanto (MON) and Bunge (BG) are acting well and pushing back towards or above recent highs. It is my experience that one of these areas, either the market leaders or the general tape, will act as a magnet on the other which means we must remain patient until we see how it all plays out. Even extremely oversold names and recent favorites such as VMWare (VMW) are perking up and challenging key resistance levels.

It's still too early to tell if we will see another push up but at least at this point, we're acting well after the strong bounce we saw last week. Traders should remain reactive rather than anticipatory to catch the next bounce and any move from here. If we continue higher, charts will set up and we'll have ample time to play them.

On the short side, some longer term shorts are developing that look very attractive. One of my favorites is Pinnacle Entertainment (PNK) which caught a downgrade yesterday, pressuring the stock to fall close to 6%. The stock is flirting with a key level here and a break below $25.62 should send it back down to the low 20's. Should it not hold this level, I am looking for the low teens. After a light volume bounce, AT&T (T) also looks as if it is running out of steam and I am watching to see how it consolidates the recent bounce. If it digests the move in this area, moving sideways, I suspect the bounce may not be over, but a reversal from here on high volume and I would look for it to challenge recent lows. I would add on a break below $36.20 and remain patient as gravity takes over.

It's a game of patience here, Minyans, with absolutely no reason to rush a thing.
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Positions in ISRG, MON, PNK and T.

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