Waiting things out...

As far as the closing is concerned, this is the third consecutive down day.    By now, you'd expect that we ought to be that much more away from the recent resistance level,  but we are actually not, which is hard to imagine after this weeks red.    We are still literally one good day away from breaking out that seemingly impenetrable resistance.      Alright, things aren't exactly as simple as the index action suggests so let's see what we have here.    The markets recent weakness is almost all stemming from the financial sector, in our opinion.   XLF penetrated the 5 day low.  You can also throw in an AMD or UPS negative guidance there, but we think what's really responsible for the lack of upside momentum is the renewed worries of financial writedowns.   Techs are not helping out at all either.   No catalysts.   Like we have said a couple of journals ago, all we are hoping here is for the financial sector to stabilize again.     When the financials are sliding off the news of potential trillion dollar writedown from IMF, and increased level 3 assets, the sentiment just will not get too positive.     If you look at most of the plays of DJIM watchlist, they can withstand a day or two worth of weakness but having a weak market three or four days in a row, even the strongest plays will not withstand the pressure of selling sooner or later.

There is no telling how long this consolidation will last, but we feel this market is just one piece of good news away from getting things rolling to the upside if we can just hang around recent highs.   Of course, it should also be noted that many of the plays on our watchlist are resource based now, so any sector specific news can also get things going.    We at DJIM are waiting patiently for things to develop and have been adding things a little bit at a time.   We think given the recent strength of many plays on our list, it's understandable for them to be pulling back some.   We are adding things at a slower pace here until we see a clear direction from this market or any specific sector.   Honestly, we think most of the plays we track are capable of a MTL move on any given day so we can not afford to take our eyes off them.

At this point, we feel the strongest group is the coal so we are a little aggressive when it comes to dip buying.   Other than that, we are simply keeping our eyes on the financials to see if there's any sign of reversal.