Exposing Ideas to the Envelope of Serendipity

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Wednesday, September 2, 2009

Wednesday Chart Watch

A long-awaited correction in stocks got underway in earnest this week, with yesterday's sell-off the most aggressive we've seen in some time. The pullback should be a welcome event for both bulls and bears-- bears for some long-denied satisfaction, and bulls for the constructive technical picture it has the potential to create. The inverse head and shoulders pattern that has been the dominant pattern in the S&P 500 and Dow is still very much in play and it might be time to take another look to see its near-term relevance. While not a perfect pattern (few are), it has followed the script quite nicely so far, and I'll be watching with interest to see if the current correction pulls back to the neckline for an important test of support, or whether we will once again see only fleeting weakness before continuing higher.

The precious metals sector is also on my radar again, after exhibiting surprising resilience during Tuesday's plunge despite relative strength in the dollar. GLD is poised to challenge an important trendline near-term, which could set a new sustainable move higher in motion. Stocks in the group that are acting well include GOLD, SA, SLW, AEM, and ABX, to name just a few.

Interesting times bring interesting trades. Trade well.
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