Market Sentiment Shifting
It seems the market sees one crisis
after another. There’s a bubble in real estate and in private equity which
leads to the subprime crisis. And now there’s a bubble in commodities, mostly
oil, leading to recession and inflation fears. In recent days the major three
indexes, the Nasdaq Composite, the Dow Jones Industrials, and the Standard
& Poor’s 500 all have giving hold signals. The only remaining bullish index
of the major four is the Russell 2000. But the Russell 2000 is also making a
top formation and could give a signal to hold any day.
The Dow was the first to end its
bullish bias, giving a hold signal nine days ago. When the first of the major
three changes sentiment, it’s time to take note and start to pair down some
positions. Both the Nasdaq and the S&P 500 gave hold signals three days
ago. Wait for a breakout to the upside or the downside at this point before
making any new buys. There could be a few strong stocks in the commodities
business that continue to rally but the safer bet at this time is to be short a
weak industry like regional airlines, regional banks, or home retail.