Exposing Ideas to the Envelope of Serendipity

Contact moo at: bluechipbulldog@gmail.com

Sunday, May 2, 2010

The View From My Porch

As I run through hundreds of charts this weekend, I thought I'd share my surroundings on this lovely, albeit hot, weekend. I've set up camp on the porch for now, with ceiling fans whirring at high speed and a pitcher of ice water close at hand. I'll put a few charts up soon-- check back in a bit.

Markets did another about-face on Friday, gapping up briefly at the open before the selling started again, sending the vast majority of stocks into negative territory with the major indexes erasing much of the prior two days' gains. Volume picked up on the $SPX, $NYSE, and Dow, but eased on the Nasdaq. Numerous indexes now have head and shoulder patterns in place, some more classic than others. None of these have yet confirmed the pattern with a decisive close and follow-through below neckline support, and this should be closely monitored in the days ahead. The $COMPX advance came to an abrupt halt right at the long-term resistance zone we looked at here last week. Goldman Sachs also continued its high-volume plunge, contributing to the bearish session. The oil sector was also volatile, with stocks negatively affected by the BP spill selling off, while those that benefited posted nice gains. The one bright spot in the widespread wreckage was the precious metals sector, with gold and silver extending their recent rally, but even here, many of the miners closed well off their highs. Let's get to a few charts.

At this juncture, I would caution bulls not to rush back into longs they may have exited until we see whether or not the recent turbulence matures into a true market correction. Most longs are clearly struggling and should be considered very judiciously right now if at all. The exceptions here are the precious metals stocks and some of the oils, where there are numerous long opportunities setting up. At the same time, I would caution bears not to get ahead of themselves again -- Friday presented us with excellent short opportunities intraday, but until we get convincing confirmation that a correction has firmly taken hold, patience and discipline, along with careful attention to risk management, seems prudent.

The mining stocks have been enjoying a spirited rally, and while they may see some very near-term consolidation after the recent run-up, bullish charts in the sector abound. We'll take a look at some of the best set-ups in the group tomorrow.

-- Brinkley
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