The late night rescue plan for embattled Portuguese Banco Espirito Santo seems to have calmed the Euro zone markets as all are higher. The technical outlook for the DAX is still negative so any bounce over the near term is likely to be followed by lower lows. The US futures are also up in early trading.
The monthly starc band analysis of the stocks in the Dow Industrials reveals that many are still quite vulnerable as several are trading close to the starc+ bands, which means they are in a high risk buy area.
Leading the list is Intel Corp. (INTC) which closed July at $33.89, which was 4% above its monthly starc+ band. Before the market?s correction is over, I expect even the strongest stocks?like INTC?to also likely be hit by profit taking.
There are several other stocks on the ten most overbought list that look even more vulnerable technically basis both the monthly and weekly charts. Let?s look at some of the stocks where investors may want to consider protecting their profits.
This morning?s slight increase in Euro zone producer prices and sharp increase in the UK?s homebuilding rate should help calm the markets. The extremely one-sided A/D ratios last Thursday make a sharp oversold rally likely this week and the action of the bond market on such a rally will be important.
Tuesday?s Market data on China?s manufacturing could be the catalyst to embolden the stock market bulls and make those on the short side nervous.
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