The major averages continued to weaken today and are flirting with technical breakdowns. After dipping below, both the S&P and Nasdaq managed to hold their 50 day moving averages while the Dow remained the laggard.

Throughout most of the day leadership was in the defensive sectors gold and drugs, and the small caps took a breather from its recent positive momentum.  The troops showed up late in the day to take the semiconductors, networkers and banks into the green and many charts look to be setting up for potential bullish moves.

The irony of this market is that although the major indices look problematic the chart patterns of many individual stocks look quite positive. The big issue is how this will resolve itself. Will the big caps finally bottom and allow the small caps to resume their momentum or will they drag the entire market lower?  We lean toward the former but will wait to see.

Despite the plethora of negative e-mail we remained bullish at Shark HQ today and took advantage of the intraday weakness to add some of our favorite positions. We feel that the negativity is actually a positive as the market could climb a wall of worry and take us higher. Trading action in select small caps has been good and we continue to look for new opportunities and reshuffle the position sheets.

There are quite a bit of earnings on tap this week, which should continue to make things very exciting.

Have a good evening. I’ll see you tomorrow.