Investors Still Looking for a Defined Direction

The market has struggled all week to hold support. While the selling hasn’t been aggressive it has been enough to dominate the headlines as the bears take every shot they can to talk the markets down. I am not disagreeing about most of the comments relative to growth looking forward, slower earnings and a fiscal cliff to deal with in the next ten weeks. They are all valid points and they have been valid for the last three quarters, but the Fed has continued to provide liquidity. That has been sugar for the markets taking it back to the March highs. Therefore we have to be patient and let this play out. Do we hold support and bounce back towards the highs or do we break lower and start a new downtrend?

Scanning the sectors shows the challenges many are facing relative to breaking down or finding support. The technology sector has been leading the downside, but it is the┬ásemiconductor sub-sector that has been the drag. The break of support at 390 on the SOX index fell 5.6%. The weakness in the computer sector has been a challenge for the chip makers and based on the projections it isn’t getting better anytime soon. This is one sector to watch on the downside relative to the short opportunities. The other sectors have been holding support, but they are in need of some help short term to regain the upside.

One breakout move on Thursday worthy of note came from China. Both FXI, iShares China ETF and GXC, SPDR China ETF broke above the top end of the trading range. The upside move was a positive for the country and the outlook relative to improving data in China. Many are still suspect of the data, but they are willing to step in and own the sector based on the current information. Watch for a follow through today relative to the breakout. The balance of Asia did not respond in kind to the move by China. Watch for a follow through move and entry opportunity in the funds.

Oil continues down the slippery slop of volatility and lack of direction for the commodity. The up and down activity is based on speculation as to where oil is heading and the current inventory. Natural gas has moved higher and breaks from the cup and handle pattern to move higher short term. Solid move in UNG and FCG are worth tracking as we move forward.

Financials continue to hold up and the banks remains in positive territory as earnings start next week. The broad market needs this sector to hold up short term as the negative impact around the market has stalled any upside movement for stocks.

The key for now is to be patient and let this unfold as the leaders define themselves, and the laggards find some reason to rise. If the downside unfolds you should be ready based on the current outl