Investing Opinion
This column originally appeared on RealMoney.com
Stocks and indices turned south last week, forcing newly minted bulls to question their blind faith in the nascent recovery effort. Although the January lows held up through Friday's closing bell, neither side can claim victory as we head into options expiration. Don't expect this volatile period to yield the perfect clarity that everyone is looking for. Blue chips have outperformed since the January lows, with the S&P 500 index retracing about half the post-low rally, while the two Nasdaq averages gave up almost 80% before they turned higher on Thursday morning. These deep swings point to the development of a trading range between the broad highs and lows posted in the last three weeks. Fortunately, this contraction phase should offer better trigger points for long and short entries. If you haven't noticed, the violent surges in recent weeks have made it very hard to find good positions, unless you're a momentum player. For the rest of us, these horrendous whipsaws are making it almost impossible to carry overnight risk. This air pocket insanity should ease up as institutions move back to the sidelines and wait for the next larger-scale trend to take control of the ticker tape. In the meantime, I'll be looking for the re-emergence of a stock-picker's market, in which good chart patterns perform relatively well while the ugly ones get uglier. In this regard, let's take a look at four market groups that escaped the selling pressure during last week's landslide. In theory, these should be the sectors that offer great trades during a relatively benign recovery period in which bulls are reluctant to act, while short-sellers get put back on the defensive. First, let's eliminate three groups from this list: homebuilders, banks and retailers. Sorry, Charlie, I'm not going to call a bottom in these beaten-down sectors. Legitimate recoveries after long downtrends take months or longer, not days or weeks. So I'll let those engaged in the popular sport of knife-catching to pound the tables on these serial underperformers.| streetTracks Gold Trust |
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| Source: eSignal |
| Invacare |
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| Source: eSignal |
| CF Industries |
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| Source: eSignal |
| Dow Jones Transportation Average |
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| Source: eSignal |
This article was written by Alan Farley, whose newsletter "The Daily Swing Trade" brings readers daily stock ideas based on a study of technical analysis.
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| Dow Jones | S&P 500 | NASDAQ | 10-Year Note |
|
|---|---|---|---|---|
| 12,393.45 | 1,310.33 | 2,827.34 | 15.81 |
Oil *
101.83
|
|
DOWN
26.41 |
DOWN
2.99 |
DOWN
10.02 |
DOWN
0.44 |
10 Yr
1.58%
SPDR Gold
151.62
|
|
-0.21%
|
-0.23%
|
-0.35%
|
-2.71%
|
Data delayed 20 minutes |






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