Heavy Lifting to Be Done

In addition to the post about Ford I wrote earlier this weekend here, I am going to present two charts below to drive home my thoughts about the current market. The first chart is the XLE daily (ETF for energy stocks), in which we see that a key multi-year reference point at $62/$63 has been lost. Last week, a rejection of a major continued breakdown led to a retracement up to that important level before Friday’s reversal. Now, just because the breakdown was rejected does not automatically mean that this is an easy money trade for longs. Note how sloppy the chart remains, meaning that the price action is expected to be far more random and volatile than usual. To be sure, energy can continue to drift higher to the 50 day moving average early this upcoming week, but that would not be such a high probability scenario as to compel you to trade it.

You can see how difficult the market is making it for both bulls and bears here, unless you are able to pinpoint every short-term fluctuation. For swing traders, though, there is not much to work with here, just yet. That can change in just a few short days of base building, which is why it pays to constantly monitor charts and stay on top of your market homework. In other words, the big institutions are going to need to come in and continue to stabilize the market this week, if these potential bottoming patterns are indeed going to prove true.

Even in the medical equipment space, where a fair amount of stocks are decently set up, a large cap name like Zimmer Holdings, Inc. is going to need more “heavy lifting” done by institutions, in order to solidify the potential double-bottom shown below. Plenty of traders would look at that move off the bottom last week as a simple knee-jerk bounce at major support, and until the big boys come in and place a strong bid under the stock discretion is indeed the better part of valor.

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