At the time I write this post I’m 55% cash, with everything but my position in True Religion (NASDAQ:TRLG) being in either materials or energy. The market has a foul smell to it, it’s not acting right. After testing the 20 day moving average on the SPX twice we dropped below it on large volume yesterday. Today we came back up to test it from below and we summarily rejected. The market will chop around into the FOMC rate announcement at 2:15 today, and likely for the remainder of the session and through tomorrow. I believe Friday will give us an idea of whether this is a shakeout or we are headed lower, my educated guess is lower. The 50 day moving average on the SPX is found at 1,168, I believe we are headed there in short order.
While I batten down the hatches and play defense, there are plenty of stocks showing good setups that I will be ready to pounce on if the market gets healthy again. Here’s what I’m looking at.
Valeant Pharmaceuticals (NYSE:VRX), Impax Laboratories (NASDAQ:IPXL), and Incyte (NASDAQ:INCY) are all building very nice bases. I believe the Nasdaq Biotech index ETF IBB trades down towards 86, and with the market not right I’m not ready to pull the trigger on these, they need more time. The longer term trends for all three are excellent and they are all fundamentally sound companies growing revenue and earnings.
Next, I’ve got my eye on the education names which have pulled back nicely to spots where they are once again attractive. Unfortunately it seems Capella Education Co.(NASDAQ:CPLA) doesn’t care about the market and has taken off today to the upside without me. Oh well, she will be back, they always come back. Other names I’m looking at are Devry (DV), Lincoln Educational Services (NASDAQ:LINC), Strayer (NASDAQ:STRA), Grand Canyon Education (NASDAQ:LOPE), and Career Education Corp. (NASDAQ:CECO).
Next, there is a reason why I still have good exposure to materials and energy, gold is flying, it is back to being a safety asset as investors move out of emerging market equities and into gold which they feel is at least an inflation hedge. The sovereign debt crisis is growing, more on that later. Look at the gold miners, Agnico-Eagle Mines (NYSE:AEM), Rangold Resources (NASDAQ:GOLD), and silver plays like Silver Wheaton (SLW) which I own.
I still like energy here which is why I haven’t cut my position in Dril-Quip (NYSE:DRQ) and still hold Apache (APA) and Tetra (NYSE:TTI). They have a short leash though. I also like the pattern in ATP Oil & Gas (ATPG), watch that one closely. Also watch Berry Petroleum (BRY) for an entry and the retest of the breakout level.
Other one off stocks that are setting up include HMIN, FIRE, NOG, ARMH, CAAS, PRGO, JCG, ARUN, ASIA, FFIV, WDC, and CREE. Remember that cash is a position and do not take breakout entries in a bad market.
Disclosure: No positions