Aftershocks on Wall Street

Let's see the magnitude of the rally's effect on the indicators, and check the Richter scale, err, charts -- including Google's.

Author:
Helene Meisler
Publish date:
Mar 14, 2023 6:55 PM EDT

Comments

The Market

Let’s talk about what today’s rally did to the indicators: absolutely nothing.

We had an earthquake in the market, and like every earthquake, there are aftershocks. What the last few days did –- or should have done -— is give us a few extremes.

For example, the number of stocks making new lows on the New York Stocks Exchange was 345 on Monday. Today had 99. It’s entirely possible it will surpass that 345 reading in the coming days, but for now 345 is the marker, the line in the sand.

If we come back down again in the coming days then what we would like to see is fewer than 345 new lows. That would give us a positive divergence. If we don’t get the positive divergence, then we’ll just be looking at an oversold rally.

If you look at the June low, you can see we surged to 1,100 new lows in early June, had a little bounce and came down to the mid-June low where there were just under 600 new lows. If you look at the fall low, we had 1,100 new lows in late September, rallied and came down into the October low when we had not quite 1,000 new lows. So should we come down again in the next few days it would be good to see fewer new lows (than 345 for the NYSE and 623 for Nasdaq).

Nasdaq’s Hi-Lo Indicator is at .21, so it needs a few more days to get fully oversold. The NYSE’s is at .37 it, too, needs some time to get fully oversold.

As I said last night, I am not here to tell you the charts look, good because they don’t. The market doesn’t feel terribly stable, either, does it? But if we’re looking for a rally to trade, I still think that’s where we are headed and it would be a better set up if we came back down in the next few days. The Daily Sentiment Index for the S&P only moved to 19 today, so if we pull back again it will be telling us to buy again.

The same way I spent February talking about the Volatility Index's DSI being low and that meant rallies in stocks were limited, I think with the S&P DSI this low, we’re more apt to see declines short lived until we move back to an overbought condition. Even if there are aftershocks from last week’s earthquake.

New Ideas

I know, the utilities are boring, right? But they are shaping up and are now the more interesting charts out there. After sliding as we began 2023, they began to stabilize in early March. There is resistance all the way up but, if the utilities exchange-traded fund XLU (XLU) can cross over $67, it changes the pattern for the decline that has been in place for months.

Today’s Indicator

The McClellan Summation Index is still heading down. It required positive 5,800 advancers minus decliners on the NYSE to halt the slide as of Monday’s close. Now it needs 3,600. What you want to see is breadth improve.

Q&A/Reader’s Feedback

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. Email Helene here.

Taking a Bite: I think it is still dicey, but we should watch Diamondback Energy (FANG) to see if it can hold here, because if it can go another week or so without breaking under $125 then I will say at least it is still in the trading range and at the lower end.

Googling Charts: I have been an advocate of Alphabet (GOOGL) in the low $90s for almost a month, when it first got down there. It has bounced around here quite a bit holding well. With the market heading toward an oversold condition I am inclined to keep believing it will hold in the upper $80s/low $90s. But if the stock cannot get up and over $97 (the mid-February high) by the end of next week I will give up on it.