A Restaurant, a Transport and a Drug Stock Walk Into a Market...
Folks are finally waking up to what's (not) happening in this market — and the plight of consumer-related stocks. Plus, a close look at what my oscillator says in store.
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Another dull day. In fact, I saw so many folks noting how boring the market has become this week. It’s like they just woke up and realized that unless it’s a day with big news (the Fed?) in the middle of the day we typically have a lot of churning around. I can hear the bulls screaming now: Never short a dull market!
You know something else folks seemed to notice only this week? That consumer-related stocks have been struggling. We looked at McDonald’s MCD the other day but let’s go back to it.
I was bearish on MCD back at $295 in February, but the other day I noted again it was not a good chart. However, I also noted that despite the bad news the stock has sat in a trading range for a month now. And if you squint really hard you can see that once again it bounced off that $265 area.
That’s what I mean. Stocks don’t go anywhere.
Oh sure once in a while we get a gap down that breaks support but mostly they have gapped down and drifted. The gap ups are not much different. In late March FedEx FDX had a big earnings gap up. What did it do thereafter? It gave it up, just to stay in the darn trading range!
Even stocks that don’t gap up or down seem to go nowhere. Johnson & Johnson JNJ has had a ton of bad news thrown at it, and still it has been in the same range since November. It would be nice if the stock could cross that downtrend line but it wouldn’t change the fact that I’ve just showed you a restaurant stock, a transport and a drug stock and they are all sitting in a range with no breakouts up or down.
Breadth just made an all-time high yet the number of stocks making new highs remains low with the NYSE at 140 and the Nasdaq right at 100.
In the meantime we are dealing with the overbought condition by chopping about so far (more chopping!). The Oscillator has backed off a bit but the math behind it says we are still overbought.
My Oscillator is based on the 10-day moving average of market breadth. What I do is look for a period of time where we are dropping long strings of negative numbers (makes us oversold) or long strings of positive numbers (makes us overbought). As you can see from the table, we are dropping exactly three red numbers in the next 10 days.
Thursday is a toss up because it’s a red number but after that, there should be a loss of upside momentum. Heck maybe that’s why we just sit around and chop all day.
