Lots of traders being mostly in cash and staying on the sidelines. I think that’s indeed the prudent thing to do right now. Although the market bounced today there is a lot of indecision. Lots of charts have put in bullish reversal candlestick patterns. Overall the picture is mixed though. Some stocks look like they will be able to shrug off the recent downmove as if nothing had happened. On the other hand lots of stocks look like they are off the track. They most likely have broken their uptrends and are now about to set up bearish wedges.
The next few days will be telling. Either the market sets up for a run to new 52 week highs or it will provide a great shorting opportunity. In any case, the way I see it fewer stocks will be able to lead the market higher as I see many stocks displaying considerable technical damage. A good time for a wait and see approach. Let the market sort things out.
A great way to exemplify how the market is now separating the wheat from the chaff would be a comparison between SWC – Stillwater Mining and ANO – Anooraq Resources. Both have given back lots of their gains and both are now starting to move back up from their recent swing lows. SWC looks much stronger and looks like it might set up for a move to new 52 week highs. ANO on the other hand looks it will encounter lots of selling pressure as resistance seems to be much more pronounced.
The direct comparison of the different messages both charts display are a perfect illustration of the mixed signals the market is sending right now:
Up-to-date SWC – Stillwater Mining chart on my public list.
Overhead resistance with SWC is less pronounced and percentage wise the resistance doesn’t look insurmountable.
Up-to-date ANO – Anooraq Resources chart on my public list.
Completely different story with ANO. Percentage wise the distance from its recent high is much greater. The fall back into the pattern is much deeper than with SWC. Overhead resistance is much more pronounced and it doesn’t look like the stock will fight its way back to new 52 week highs easily.
Two qualities are indispensable: first, an intellect that, even in the darkest hour, retains some glimmerings of the inner light which leads to truth; and second, the courage to follow this faint light wherever it may lead. – Karl Von Clausewitz
My public list with all my charts can be viewed here:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2791469
Have a great evening!