Looking to the indices, on Friday, the Nasdaq sold off in early trading. It then chopped sideways for the remainder of the day. This action has it closing poorly and keeps it in a trading range.
Looking to the sectors, financial related stocks such as banks and broker/dealer sold off especially hard. This action has them breaking down out of short-term trading ranges and could suggest that a top is forming here. Internet finished lower and looks like it could be forming a head and shoulders top. Software still looks like it has formed a top and has the potential to continue lower. The semis managed to finish in the plus column but remain in wide and loose trading range. Energy stocks, homebuilders and utilities continue to sell off out of an pullbacks and/or inverted cup and handles.
So what do we do? The fact that the S&P is challenging the bottom of its trading range suggests that it could break down. This is further confirmed by the negative sector action mentioned above. Therefore, you might want to start putting together a list of potential shorts. However, until we get out of the trading range, you might still want to keep positions on the light side.
No setups again today tonight (Friday). Remain patient, we should see numerous stocks setting up if the S&P breaks down out of its trading range.
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