Don't Bother Knocking, Euphoria Barges Right In
As we begin a new quarter, my focus is on three things. Plus, an against-the-grain statistic warns us to stay on our toes, a look at the mighty Nvidia, and much more.
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The Market
You know what I’m focused on by now. The channel lines on the various indexes. The bonds — will they hold that short-term line I have drawn in? And the fact that about a month ago I began noting that tech, or the Magnificent (insert whatever number you’d like here) was no longer leading.
I remain focused on those issues. The ingredients are in place for a correction as they have been for two months now but the overall market does not care. What it seems to care about are those lines. They have been in place since December and I believe unless/until we break the lower line it won’t matter.
However, to add to the list of sentiment indicators that have gone to an extreme, the Citi Panic/Euphoria Model is no longer knocking on the door of "Euphoria," it has barged right through the doorway.
Last week I noted that there are all these statistics floating around telling us how if this that or the other is in place the market was up six to 12 months later. My comment to those types of statistics is that the market is up 75% of the time so what exactly are you telling me when you tell me the market was up six to 12 months later? The key is the path to get there.
But here is the Citi Panic/Euphoria Model, which states: Euphoria levels generate a better than 80% probability of stock prices being lower one year later.
Since stocks are typically higher 75% of the time, a statistic that goes against that grain is more noteworthy to me than one that simply confirms it. It doesn’t mean we have to go down immediately but it is one of those statistics that tells us to be on our toes, especially if those lines break.
New Ideas
With the commodity markets heating up perhaps we ought to look at CME Group CME. It has an unfulfilled measured target around $225-230. Under $210-ish and I’m wrong.
I was asked to follow up on the iShares Silver Trust SLV again after it tagged resistance and backed off. I am still waiting patiently for it to breakout (maybe not so patiently!). I would prefer it doesn’t break under $22. But I would also remind you that I remain bullish on the SPDR S&P Metals and Mining ETF XME.
Today’s Indicator
New highs improved last week, although the Nasdaq is still lagging behind. Yet the Nasdaq Hi-Lo Indicator turned back up.
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.
RH RH broke out last week and is now into the gap from September. It would be typical for the stock to fill the gap and stall or correct. If I were trading RH I would sell a little on such a gap fill. Longer term, the measured target is back near the highs around $390-400.
United States Natural Gas Fund UNG, an ETF to be long natural gas, is almost always a widow maker. If you play from the long side and you get a rally, always take profits quickly. With that as a caveat, it is oversold down here. The DSI got to 14 one day last week; it is currently at 19 due to that pathetic bounce late in the week. One more push down with some panic would get the DSI to buyable levels so I wouldn’t argue too loudly against a trade on the long side heading our way early in the new quarter.
We had some success with HF Sinclair DINO on the long side last year but it has done nothing for the last eight months. I don’t want to see it break under $58 and the measured target is the upper $60s so the risk/reward is decent here.
I don’t love Nvidia NVDA here because of all the hype and the stock has been stagnant for weeks now. If it plunged to the $850 area and held it would be a trade on the long side. You may recall in early December I liked the stock at $450 because it had been going sideways for months. If it did that again I’d find a reason to like it again; otherwise, $850 is an important level.
