Coming Up Later This Week: Fed Decision, Jobs Report and an Overbought Condition
Let's talk about what should really matter this week, as well as sentiment, the yen, bonds, Microsoft, Marvell and more!
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The Market
We are now approaching a short-term overbought condition. I expect it will arrive in the latter part of this week. And we have the well-watched 50-day moving average.
Here’s my take: I don’t much care about the 50-day moving average. Heck, back in August we blew right through it and it didn’t matter at all. The short-term overbought condition is what mattered back then.
I have been spending a great deal of time talking about that August rally and the similarities, but I want to highlight one small difference: sentiment.
Last week I noted the fall in the Investors Intelligence bulls (ten points) and how that was significant (and bullish). The AAII Day Traders managed to flip all the way so that there are more bears than bulls — or at least as of last Thursday there were.
And the folks at National Association of Active Investment Managers (NAAIM) cut their exposure in half from the peak in early April, with their exposure now at 59. Oh sure it was worse in August in that by the time we enjoyed that oversold rally the NAAIM number was under 40; however, this time the other sentiment indicators have moved much more swiftly.
I did notice that the yen seemed to finally gain chatter. As a reminder, I think that move in the yen bears watching very closely. But curiously, the yen had a massive move while I was gone but bonds (here in the U.S.) did not.
As we approached the FOMC meeting on Wednesday this week and the Employment number on Friday I am still waiting (not so patiently!) for iShares 20+ Year Treasury Bond ETF TLT to get to that $91-92 resistance area.
New Ideas
We have had some success lately trading the down and out and truly hated stocks (or forgotten favorites) such as Tesla TSLA and Palo Alto Networks PANW. I have also been advocating Boeing BA and Home Depot HD and they have done more sputtering than rallying. I remain hopefully the shorts will have to cover these two big-cap names as well.
Today’s Indicator
The 30-day moving average of the advance/decline line sits at the zero line. I still think it is not sufficiently oversold.
Q&A/Reader’s Feedback
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Hubbell HUBB hasn’t done anything wrong yet but it met its upside measured target so I’d be neutral on it. I think if it pulled back into that $390 area and held I might buy it for a trade.
I have had a measured target for Microsoft MSFT around $440 for months now. Is getting to $430 enough? I’d be very concerned if MSFT breaks under $390-ish because that would measure to $360-370 and would complete a head-and-shoulders top.
Marvell Technology MRVL had a measured target in the $77-82 area after breaking out of that base. It has now corrected and held $62-ish so I would say the near term looks murky to me (resistance overhead and support just below). So as long as it holds over $62-ish it ought to eventually improve. Mostly it looks sideways to me.
