IS THE UPTREND ENDING?

This is the question that many traders are asking themselves after the market sold off over the last two days. Last week I recommended that you start building your cash. This should have protected you from the sell off over the last two days. We like sell offs because they can create new buying opportunities. Before any new buying takes place, we want to make sure we are done correcting. There is a possibility that we have completed a bullish ABC pattern and the market is going to rally back up. All we have right now is a 44.7% Fibonacci retracement acting as support. There would definitely need to be some confirmation for that outlook. There is some evidence that the overall uptrend could be in jeopardy. Stocks are having trouble rallying...even when their earnings are positive. I gave the examples of AA, IBM, INTC, and GS last week. Earnings season has about another 10 days. After that, it is hard to see what news will push these stocks higher...especially if the earnings didn't do it. There are some other clues that we need to pay attention to. First, look at the DOW Transportation index. This is often a leading indicator of the market. Notice that it has already dropped below its 50 day moving average. This is the second time it has done this in the last month. The VIX rallied up to its 50 day MA today. Remember the inverse relationship the VIX has with the market. If it breaks above its 50 day MA, we could be in for a larger correction. If the 50 day MA holds as resistance, we could be in for another rally. The dollar has also started to strengthen which could put pressure on the commodity stocks. The best advice for tomorrow would be to sit on the sidelines and wait to see how the market reacts. If we start to rally, you could look at stocks that are sitting at their 50 day MA. Many financial stocks are in this position like GS, JPM, AXP, and WFC. I also like some of the gaming stocks like BYD, MGM, and WYNN. Again...that is if the market begins to rally. I like the reward to risk on those stocks...particularly if a stop is placed below the 50 day MA. APC and APA have made nice pullbacks and could be good potential plays if the dollar continues its downtrend. AAPL could be nearing another buy postion. AMZN has made a sweet move, but I wouldn't chase it right here. It will give you another chance if you are patient.