A Rally in the Rough
The Market
Today’s action did nothing to deter me in my view that we are headed to a rally. And I will say that again even if we are down on Friday. Or if we are down on Monday.
The indicators have been lining up this way for weeks now. The Volume Indicator got to 42% (oversold) yesterday. The 30-day moving average of the advance/decline line will be maximum oversold by Monday. Nasdaq’s Hi-Lo Indicator is at .16 (under .20 is oversold). The New York Stock Exchange’s Hi-Lo Indicator is at .25. I expect it to be under .20 by Monday,
Tuesday at the latest.
And sure, the Russell 2000 has lagged. But check this out. It has now been four days since I showed you the Momentum Indicator, where I walked the Russell down 100, then 150 points and still the Momentum Indicator went up today and again next week. So with the Russell flat on the week I did the exercise again to see if it would change. It hasn’t. Once again I walked it down another 100 points from here and look at how it lifts next week.
On the sentiment front the Investors Intelligence bulls fell to 40% this week (from 45%). Today the American Association of Individual Investor bulls collapsed to teenager readings at 19.2%. That’s the lowest since September.
Bears lifted to 48.4%, the highest since late December (when they were at 52%)
The National Association of Active Investment Managers Exposure slipped to 42, the same level it was in late December.
Down below you can even see that the 10-day moving average of the put/call ratio has rolled over.
The Daily Sentiment Index for the S&P 500 of course lifted itself to 22. So once again I will note what I have said all week and have reiterated in the opening lines: If we fall Friday and/or Monday that S&P DSI is going right back to being a teenager, which is bullish for stocks.
Again, the charts do not look great, but that doesn’t mean we can’t rally. I hope we get some downside in the next day or so, because it would keep folks from getting too bullish.
New Ideas
I want to start with a follow up on the energy exchange-traded fund XLE (XLE) . That was a nice reversal today, but I still think it rallies to $80-$82 and then comes back down.
I am still in the camp that says Shopify (SHOP) should fill that gap.
Today’s Indicator
The 10-day moving average of the put/call ratio is discussed above.
Q&A/Reader’s Feedback
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Seeing Through Mosaic: I really thought Mosaic (MOS) would rally to $55-$56 and pullback to $48-$50 where we could buy it again but it flew through $48-$50 like a hot knife through butter and the best I can say is it is at support in the $42-$44 area. So, yes, it should bounce, but now I don’t think it can have the pizzazz on the upside I had thought previously.
Resistance to AbbVie: AbbVie (ABBV) did well by bouncing off the uptrend, line, but I still think that $158-$160 area is going to be resistance for this chart.
Buy Now ...: PayPal (PYPL) rallied and then fell, but has hung in there rather well, so I am still willing to give it a chance on the rally front. As long as it doesn’t crack under Monday’s low with any oomph it gets the benefit of the doubt.
Tough as Steel: Steel Dynamics (STLD) has good news and bad news. The good news is that top that broke down at $115 measured to around $100, which was achieved in one day! The bad news is that the resistance at $115 should be difficult and therefore I’m inclined to sell it there.
Mastercard Target: Mastercard (MA) has support here, but it’s also a potential head-and-shoulders top should it break this $335-$340 area. So that’s the stop, because if it breaks that the next target would be around $325 (gap fill) and then a measured target around $300.
