With the S&P having reached his downside targets, technician Richard Rhodes is now taking some long positions. In The Rhodes Report, he  looks to steel and transportation.

Track Richard’s picks at:

http://trackthepros.com/stocks/category/1503

“The S&P 500 longer-term technicals remain bearish, although they have reached and exceeded our downside target.

“Now, the S&P is becoming rather oversold on a number of measures that have in the past been consistent with a sharp snap back rally of either the long-term or transient kind.

“At this point, we vote with the latter transient kind, but clearly the risk-reward of selling short at current levels is not very good —hence we’ll only consider doing so on rallies into resistance.

“We do believe there is a another shoe to fall, but not at this very moment, for the markets seem to have prepared for another jog higher towards resistance levels

“Our trading strategy is rather clear – we are buyers of stocks now given the risk-reward does not favor short selling at this immediate time.

“Perhaps this will be in several days; perhaps several weeks or even months…we don’t know. In the interim, we are scaling into long positions given the oversold condition

“We are now adding a long position in the Market Vector Steel ETF (NYSE:SLX). Thereafter, we’ll consider adding further long positions if the rally appears sustainable  — meaning the advance/decline figures improve markedly.

“We are also adding a long position in LandStar Systems (NASDAQ: LSTR), a transportation issue that forged a rather bullish key reversal on a day when the Dow Industrials were down sharply. Technically, we like this type of relative strength; and we’re acting upon it.”