As Meta Slides, This Market Indicator Is Moving in the Right Direction
Most of the indicators did not change, but one did — and it gives me confidence in my view. Plus a look at Meta getting taken to the woodshed, bonds, Transports, the Utes bandwagon and more.
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Note: I am taking a few days off to visit my mother. The next edition of Top Stocks will be Monday evening, April 29th.
The Market
Everyone will surely be up in arms over the slide in Meta META. I thought they would fuss over the move in the yen so clearly this is another indication that I am truly bad at narratives.
So let’s stick to the indicators. Bonds bent but did not break. There is still room for them to break, though, especially with the PCE out on Friday but for Wednesday, they tried to crush them and they didn’t. The DSI is 40. I wish it were closer to 20. But they continue to feel like they are trying to find a foothold to me.
The Transports were awful again Wednesday. Not too many were fussing over it. I prefer hysteria but here too they kissed last week’s low area but did not break it. Not yet at least.
The Utes had their sixth straight green day. Now we know I like the Utes but I want some pullback here. Last September the Utes had nine straight green days and that was bearish. The statistics show that that many up days in a row are not bullish for the Utes. And too many are jumping on the Utes bandwagon.
Most of the indicators did not change, but I have one intermediate-term indicator that is moving in the right direction so it gives me confidence in my view that a move back down after the oversold rally should take the intermediate-term indicators to a decent oversold condition.
It’s the Investors Intelligence survey. It is extremely rare for them to move around like day traders (AAII tends to do that) but they have. The bulls dropped 10 points to 46.2%. Recall just a few short weeks ago they were at 61%. They were 42% at the October lows.
The bears popped seven points to 21.5%. This is the highest reading since November. At the October lows the bears were 26%.
Finally there is the Bull/Bear Ratio. A few weeks ago we looked at this and there were more than four bulls for every bear. Now there are just over two. In October we were just under two. Obviously under one is a big buy zone (that occurred in the fall of 2022). But the bottom line is sentiment is moving in the right direction, as it should.
New Ideas
We looked at CSX Corp. CSX as a short a few weeks back and my target was down in this $33 area. I think it’s time to cover the short.
We haven’t looked at Meta META in a while but since it is being taken to the woodshed after hours I figured I should comment on it. There is a gap fill around $400 so it is likely going to be dragged there. But should it open under $455 and not be able to fill that opening gap, it will leave behind a big island overhead. Without getting into the technical weeds, island tops are bearish so while we may get some short-term (upside) trades in it, the chart says that’s about all you can expect for the time being. If it takes a few days to get to $400 then I’d see it as a very short-term oversold trade.
Today’s Indicator
The Volume Indicator has ticked up to 50%. I would expect the next push down takes it into oversold territory.
Q&A/Reader’s Feedback
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Genuine Parts GPC had a nice gap up and thus far has held it but my experience is that at some point it will pull back and test that line so I would be inclined to wait and buy that dip. It has a measured target in the mid-$180s.
Alcoa AA is trying to bottom but there is still plenty of resistance to eat through overhead. My inclination is to consider buying it at that blue line.
Novo Nordisk NVO bounced right off the line. Two things to notice: that gap up eventually made its way back to the support area (see GPC comments above) and secondly, gradual pullbacks like this are healthy, in my view. The risk/reward is good since under $122 you know you are wrong to be long.
