Monday, August 25, 2008

Indices At Critical Support Levels - Bulls Must Hold Here

Good evening traders. Here are the major indices, which are at critical support levels. Volume was still very low today, but stocks can move lower on lower volume much easier than they can move higher on lower volume. 1260 on the S&P 500 and 2360 on the Nasdaq are the key levels from my perspective - if they are broken, then I think this downtrend will be in full effect. That being said, let's remember how many times over the past few months this market has actually followed-through on any buying or selling it saw. We could easily bounce tomorrow and just get back into the continued chop. Therefore, I may wait for a little more confirmation that I normally would in terms of getting heavily short. I do think we are headed much lower over the next few months, but timing it right will be important.

S&P 500
Nasdaq

I really didn't even go through my long scans tonight - perhaps that means we're headed higher. I just don't see any need to right now - I am not interested in going long here regardless of what the chart may look like. It is just not worth the risk.

I am looking for nice, low-risk short setups, and here are some of the charts I am watching for tomorrow. Financials are still the main area I want to focus on. If XLF breaks below $19.75, I would likely look hard at SKF again.

WCBO, EWBC, FHN, EVR

Here are some of the others I am looking at. They are kind of a mix of sectors.

PNK, CREE, KMX, FLS
ALK, SOHU, SNDA, SINA

I still think commodities and now shippers look rather weak here and could be setting up some nice short plays.

AEM, CXO, DSX, EXM
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Let's see if we get follow-through tomorrow and break these key support levels, or if the bulls step up tomorrow and put the next large decline in the market off for another week or so. I would not be surprised by either outcome, and will be prepared either way. Best of luck Tuesday.

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