Trader Mike

This was one of the stranger days I’ve seen in a very long time. Some of the recently weakest sectors, like the transports, the Nasdaq-100 and the semis, rallied the most today. The trannies were obviously boosted by oil getting crushed for the second day in a row. As for the why the semis and the Naz 100 got moving today, your guess is as good as mine. But that’s not the strange part, what really got me about today was how narrow the rally was. For most of the day, before I left due to boredom, the advance decline line was negative. That combined with the S&P and Dow being in the red made me really suspect of the Nasdaq rally.

On a day like this I always want to look at how the various sectors performed. Here are some tables from the StockCharts.com’s Market Summary page . The sole long green bar next to the Nasdaq 100 says it all about the Major Indices — it had a 1.9% gain and no other index on the list was up more than 0.32%. That’s narrow!:

The sector (industry) indices shows that the internet stocks (GOOG) did the heavy lifting today followed by semiconductors, computer technology, biowrecks and transportation stocks:

Here’s the Nasdaq chart:

I hate to add to the bearish consensus but I have to call ‘em like I see ‘em. Right now I’m seeing a lot of charts which look ready to roll over. A good number of them look a lot like the QQQQ chart — a weak bounce back to the 50-day moving average which reminds me of many of the patterns in William O’Neil’s ‘How to Make Money Selling Stocks Short’. For now the opportunities look better to me on the short side.

Below are charts of the indices as well as some of the better (worse?) looking stocks I found in my scans, including LRCX, BRCM, AAPL, MVL, RIMM, CIEN, RACK and GOOG:

I don’t have much to say about Friday. After good sized gaps up the Naz and S&P ended basically flat for the day. I’m sure that the quadruple expiration played a big part in Friday’s action. The thing that still jumps out to me is the reluctance of the Russell 2000 and Nasdaq to join the daily new high party being had by the Dow and S&P 500.

After (barely) popping out of that symmetrical triangle on Thursday, the Nasdaq appears to be stuck in another triangle now.

More of the same for the S&P…

The Dow Transportation Index is looking tired.

The Russell continues to be the …

I was asked what I thought was a good entry and target price for shorting the Dow Transportation Index. My answer, as if often the case is “it depends”. One possible entry is at or near the top of its downtrend channel whch, at the moment, is around $81. If I were to try to catch the top of the channel I’d only short it if it showed some weakness after it’s reached the top of the channel. A bearish candle or two would be great.

One thing that I don’t like about that strategy is that the index would be back above the June lows and the 200-day moving average. I’d be …