A Rally and a Push Down

The Market

That's twice this week that I thought we would rally and we did not. To my mind, this speaks again of the change we have been seeing in the market of late. It began with the Nasdaq a few weeks ago, when we started seeing more selling than buying. It moved to the NYSE this week.

I can make the case for a rally in the next one to three days based on the indicators. But my logical brain wonders if we can rally with the weekend looming and the Crimean secession referendum on Sunday. If it was not a Friday with potential ramifications, I would be betting on a one- to three-day rally and then another push down.

Why the rally? Well, the Arms Index (TRIN) on the NYSE got to 2.5 today. The last time it was this high was when it tagged 2.9 on February 3, the day before the early February low. Then there is the put/call ratio. You had better sit down for this one: It finally went to triple digits, with a reading of 104%. The last time it went over 100% was October 9, which was a low in the market.

Even more curious, there was no pickup in new lows on the NYSE vs. yesterday. And we filled the gap on the S&P 500 from last Tuesday's move up.

So why a push down? I have been targeting this time frame for weeks now as the time to get the market back to overbought -- the time for the retest. And heck, it still plays out that July-into-August scenario. But here are the statistics that say so. The McClellan Summation Indices have now turned down. The sentiment readings are still too bullish. For example, the Investors Intelligence readings show 55% bulls; they were in the low 40% area in early February.

Also on the sentiment front, the 10-day moving average of the put/call ratio that we discussed last evening is most definitely turning up. (See the chart below.) The 30-day moving average of the advance/decline line is just about overbought, as is the volume indicator.

There was not that much selling on the Nasdaq today vs. Tuesday in terms of volume. But the number of stocks making new lows on that index doubled from yesterday.

In terms of levels on the S&P, even I find it amazing that the market got to just shy of 1875 but could not quite get over it. So we know that was a good resistance level. The downside will have everyone watching 1840-ish, since that was last week's low. The 50-day moving average is near 1830. In the very near term, resistance is now 1860. If we rally there and fail, we will have a small head-and-shoulders top in place.

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New Ideas

Last week we looked at the PowerShares DB US Dollar Index Bullish Fund (UUP) , an ETF to be long the U.S. dollar. We have also looked at the CurrencyShares Euro Trust (FXE) several times as well. I have been bearish on the dollar and bullish on the euro for quite some time; last week was no exception. But the action, courtesy of comments from European Central Bank President Mario Draghi today, reversed the dollar in a heartbeat, and now it is hard for me to be bearish on UUP anymore. I would note that the target price was only $20.80. But still, with action like this, I have to move my old opinion to the sidelines.

The move in the bonds also took me by surprise, since I figured for sure we would see one more rally in the ProShares UltraShort 20+ Year Treasury ETF (TBT) , as per last night's Q&A section. The problem with turning bearish on this now is that when a chart plunges like that and does not break to a lower low, any break further on tends to be exhaustive rather than fresh unless it occurs on a gap. Therefore, I will adopt a wait-and-see attitude that maybe TBT holds at $68.

Visa (V) is another chart like Yahoo! (YHOO:Nasdaq), which we looked at the other night; it has made a lower high and is turning down. The difference is that V is just now breaking the uptrend line. If it can rally back to $223-ish, you should sell it. The stop would be over $225; the target around $210. I would expect the target to come in a few weeks, not a few days.

Today's Indicator

The 10-day moving average of the put/call ratio is discussed in full above.

Q&A

Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice.

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When 3D Systems (DDD) broke down on the gap, it completed a head-and-shoulders top. The top measures to $50-ish, but for now, the February spike low and that uptrend line dating back to October are support. Perhaps there is a "save" in store. But I think DDD is likely to test $50 in the coming weeks/month.

Once again the question is about Potash (POT) and where it is going. I continue to think this stock is a slow mover, with a target near $37 that fills the gap. If it continues to hold the uptrend line (currently at $32), then I can make a case for a target in the $40-ish area.

I can actually come up with a target around $200 on EOG Resources (EOG) in the longer term. But right now I think the stock is in correction mode. I would need to see the pattern develop first, and then would probably start looking at the chart somewhere around $170-$175 to see if it could hold and form another base.