The price action this week is confirmation for what I've been saying all along "prices will change violently but will quickly lose steam when trying to push higher." The downward forces that have been pushing prices lower will keep tech stocks from running up through the first quarter of the year. Sorry if I sound so repetitive. But in this case the charts are so clear cut, the patterns so obvious, that I feel 99.9% confident in repeating this statement. Having this frame of reference has prevented me from being swept up in the mid-week frenzy caused by some premature call by an unknown sox analyst. Especially when the "visibility" going forward even by the companies themselves is murky at best. Knowing that that brick wall is there, also offers me the added advantage of analyzing strong moves in prices for signs of distribution by the smart money. That's right, if stocks are not going higher anytime soon, then what are we really seeing when we see stocks move like they did midweek - ACCUMULATION or DISTRIBUTION of shares? A number of stocks made new lows by Fridays close even after all the short term excitement. Look at the daily action in ADCT. This is a stock that I pointed out in my last post that would be under significant pressure. The stock held strong even giving the appearance of a possible breakout in prices. Friday gave us the true direction for prices. That pressure will continue this week as we head into their earnings announcement. Same thing applies to JNPR. This stock could get another $25 haircut by month end if that support doesn't hold. To me it's all about one thing, can these companies hold that support? SUNW couldn't do this week, the stock hit a new low. A breakdown of support implies a completely new set of ramifications for everything that relates to the markets and our economy. Needless to say SUNW needs to make an abrupt about face, if not, you have to seriously question any tech stocks ability to do differently. So the pressure will continue. JNPR, CSCO, HAND, ADCT, ARBA, PAYX and MOT are just a handful of stocks facing immediate pressure this week.
Unlike two years ago, my comments today have been related to the tech sector or COMPX. I have left the other indices alone simply because the market has proven to us in the past that they can move independent of one another. But I did want to comment that I believe the DOW over the next week or so will make a more significant push through the 11,000 mark. Even after the damage on Friday, prices should push higher this coming week. Despite the overall diamond formation of the past year and a half the last couple of months have set us up for a very bullish formation overall. I believe this break will happen soon. What happens after this push will be my main concern. Will prices quickly crater? More importantly, does this push imply that these tech stocks are close to a bottom? Based on some of the patterns that I'm seeing my immediate answer to that is no. But something to keep a eye out for. Besides the DOW, the Transports have a very bullish pattern and they are already three months into a major breakout. So there are some very conflicting signals. Why should now be any different.
Regards,
SO |
