The Market
We now have had five days in a row of seeing green on our screens. This is the market's longest winning streak since September/October. I do not know that this particular statistic has any bearing on stocks going forward. You see, in September we went to seven green days in a row before going down one and up another four. In October, we fell on Day Six and then rallied for another four days.
What should be of concern to us is the upcoming overbought reading that will be coupled with some low put/call ratios. Yes, that is correct; we went from folks fighting the tape in the middle of last week to being complacent today.
The equity put/call ratio dipped into the 40s, to a reading of 47% today. Let us review similar results from 2014. There was a reading in the 40s on January 7. The S&P 500 hung around and chopped for four more days and on Day Five it fell 23 points. The next occurrences were March 4 and 5. We chopped for two days, and then over the next five days the S&P lost nearly 40 points.
Most recently, the equity put/call ratio was low on April 1 and 9. After the first instance, we hung around for one more day and then lost 45 points in the next three days. A nice rebound of 26 points was followed by the second low ratio, which resulted in a nearly 60-point loss in the S&P.
Let us go one step further, since the International Securities Exchange equity call/put ratio confirmed this with a reading just over 200%, at 209%. Let us see if this has also occurred when the equity put/call ratio has dropped into the 40s. Believe it or not, the only times were March 3 and 4.
Here is what these statistics tell me: We will be overbought Wednesday/Thursday this week. So I expect some sort of pullback by midweek. It might occur tomorrow, but I am cheering for Wednesday or Thursday.
The market has become very trading oriented with the indices, especially the S&P, trading in a range this year. As a subscriber pointed out to me, when I said back in January that I expected a chop-fest, most folks likely did not think we would stay on either side of unchanged on the year. Heck, neither did I; I thought the swings would be closer to 10% swings, not 5%. But this is what we have so far.
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New Ideas
Many of you have asked for a follow-up on the SPDR Gold Trust Shares ETF (GLD) . The fund has had a wild ride of late, but the chart is starting to look like that W pattern I drew in late March/early April. I would prefer to see it hold this $123-$124 area and bounce, preferably hard, from here. If it breaks that support, I will have to rethink my theory about its making a W pattern here.
Today's Indicator
The 30-day moving average of the advance/decline line is a little bit oversold. It will be back to overbought sometime between Thursday and Monday.
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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Look at Las Vegas Sands (LVS) over the past year and notice how it has often made a bottom: By spiking downward, having a clean-out, and then going its merry way. Only in October did it come back for a retest. The one difference with this spike down is that has reached a lower low than the last time. Also notice on the one-year chart is that there is a head-and-shoulders top in place.
If we move over to the shorter-term (six-month) chart, we see plenty of resistance as the stock gets up toward $80. Give it a chance to hit $80, but if it fails here, it will look an awful lot like the early April failure. If you forced me to issue a prediction, I would say it will get to $80 before retesting that spike low. As long as it stays over $74, give it that chance.
I did not like today's action in Pan American Silver (PAAS:Nasdaq). But I also think if it gets down into that $11.50-$12-ish area (where the trend lines lend support), you should look for a bounce. In fact, I suspect that gold and silver will enjoy another rally sometime later this week.
Diamondback Energy (FANG:Nasdaq) has not done a thing wrong and is a healthy chart. At this point, though, I cannot come up with another upside target beyond $75. So I suspect that in another day or two the stock will go into a sideways or corrective move. As long as that uptrend line stays intact, the chart is a hold.
