To continue with our analogy of the hurricane, the last several days has been the eye of the storm passing over the market. We saw nice reversal of the short term and long term momentum indicators. However the fast momentum indicator that I use is show that most of the ETFs and stocks have hit an exhaustion point and we will now see some downside movement. The key will be as we move into the backside of the market hurricane if we significantly reverse the momentum that we have been building up the last few trading sessions. My hunch is that we won't, but the market will tell us the truth.
There are some bright spots as we head into the next few days. Technology is one of them. Momentum is building for QQQQ, INTC, CSCO, GLW, RIMM, SMH, NVDA, XLK and they are not showing signs of near term exhaustion. They are are still facing negative long term momentum numbers, so be careful. I am also liking the Euro ETF, FXE and Utility ETF, XLU, both of which would make sense in a falling interest rate environment.
In the coming days I will be posting information about my methodology and the list of ETF and stocks that I track. Watch for that.
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