Thursday, May 8, 2008

Some Charts Still Holding Up, Homebuilders Breaking Down

The trendline is still holding on the S&P and tomorrow may be a key day. If we break below today's lows, then things could get a lot worse. After AIG's terrible earnings report, I am interested to see how the financials (and the S&P) react Friday.

S&P 500, NasdaqCharts from Telechart2007, Courtesy of Worden Brothers, Inc.

Here are the two earnings-related charts I discussed early. PCLN is a possibility as a earnings-related play tomorrow.

OFI, ENER
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

All of the other commodity stocks have not stopped rallying after a sharp but brief pullback, so why not have gold join the party. I saw gold stocks pop up in my scans tonight - I don't know if this is just an oversold bounce or if this is a sign of more trouble in terms of the dollar. We'll find out, but I will keep SWC and PAL on my watchlist simply because how fast they can move when the precious metals are hot. DGP is the double gold ETF and I may be interested in that.

NGD, DROOY, SWC, PAL
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Here's the best charts I am seeing right now in this market. I didn't put any comments - I'll let you decide on if they are worthy of a buy right now. The market is at a tenuous point here so any new buys need to have tight stop losses to protect yourself against any downside.

DGLY, ARBA, EW, JRJC
SKX, KDN, WGOV, PNRA
MATK, AMED, GA, LUFK
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

On the short side, some of the formerly lagging sectors that have bounced in a strong way during this rally (retails, homebuilders, financials) look like they might be starting to run out of steam. The homebuilders look especially weak - see the chart below. SRS is the double inverse ETF for the homebuilders. I am still looking at FXP and SKF if the market confirms a move lower.

XHB, SRS, HOV, MTH
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

We'll see if we get any resolution tomorrow. I am prepared for anything but am doing my best to wait until the market tells us what that "anything" is going to be. Best of luck Friday.


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