Exposing Ideas to the Envelope of Serendipity

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Monday, May 16, 2011

Markets Behaving Badly

The Nasdaq 100 has led the charge higher off the 2009 lows, being the first of the major indices to overcome the 2007 high, which it is still holding comfortably above. At this point, neither index charts nor overall market internals support the idea that a significant top has been put in, but instead suggest another corrective phase is playing out at a major resistance level. Both the $COMPX and the $RUT are battling to put those same 2007 highs decisively behind them, and after the prolonged bull run experienced, some turbulence accompanied by sector rotations and internal corrections is not at all surprising. For the very near-term, I'm keeping a close eye on the $NDX, and a possible short-term double top that could play out. It is not a large pattern, and there is strong support not far below, where a buying opportunity will likely present, if not before. In the meantime, recent market action has been erratic, disorganized, and challenging, although there have certainly been some excellent scalping opportunities for the nimble. That said, when markets are behaving badly, waiting patiently for better action while watching and planning from the sidelines may make a lot of sense for most.

Trade well.

-- Brinkley
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