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Tuesday's Morning Outlook 4/27/2010

Bottom Line: We’ll be on the lookout once again if the decline we’re set up for confirms a top or not.

The YM’s (Dow E-Mini) hit near an upside C wave target yesterday ($11214) and we take that as a sign to look more closely at just how the upcoming sub-divisions lower unfold. If we see evidence it’s falling in 5 waves, we know what to do. If it starts to unwind down in three, it’s one more dip that will be exploited and thus another attempt back up to recovery highs can be expected.

With the temptation to play the strong EPS names (CAT, MMM, WHR, CMI etc), it’s still too early to make the claim that the last guy is in yet. Where does it  exhaust?...good question. We are surprised given the current landscape that it’s come this far.

However, we can control what we can control and that’s our risk tolerance, which we feel isn’t quite where we want it to be. We are maintaining a balanced approach, which means a blend of both longs and shorts until there’s sufficient evidence to change.

This morning we like:

V, CTSH, CERN and LPNT as longs.

GPRO DGX as shorts\