While the past two months have been volatile and bleak, this week, something worse (for the bulls) happened. While previously we’ve seen three sectors holding up the market – utilities, healthcare and consumer staples…
This week even these faltered…
The S&Ps have 11 sectors and for the S&Ps to rise, they need at least three or four of these sectors and their top weighted products to move higher.
As apart of my Five Star strategy, identifying the sectors that are set to move higher is key in what I do. Right now, the only hope of any of them moving higher will be the result of an extreme oversold condition that’ll be the result of everyone who wanted to bail, finally bailing — and only then, will the slaughtering end.
So what sectors could potentially move higher from oversold conditions then?
Potentially, industrials, transportation, and financials.
Keep in mind, however, these are counter trend longs, and do NOT qualify for basic trend-following setups. However, in this market, that’s an option. It should also be closely followed because shifts in transportation stocks generally lead the market, and if and when this chart starts to trend higher, this could be the bottom in the market.
So how am I making money until then?
I’ll continue shorting rallies.
Facebook finally came through for me today, after less than desired heat, but it fell perfectly off of the 50 period simple moving averages. After breaking a key retracement level to the downside, that clears the path to my target at $120.
As for Amazon, I’m also bearish, and I’m looking for AMZN to hit a $1320 price target. The break of $1600 was critical, and I expect AMZN to basically be cut in half just as FB and almost AAPL have done.
As for current trades, this is a rough spot here because with the price action today, it makes it tough to short at these levels.
Important note: You never want to short when the S&PS are at the 1.618 extension to the downside.
The areas I see potential for short exposure are Chinese internet stocks as well as XLC. I continue to like these areas to short on days in which the market rallies higher.
Stay tuned, and I’ll let you know when I see signs of a low — but, I think we’re almost there.
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