En Route to Overbought
The Market
Now we’re getting short-term overbought. If the market is not down hard on Friday, then I fully expect we will see the Oscillator make a push upward to reach a minor overbought condition.
In addition, while the McClellan Summation Index is heading up (bullish), it will now require a net differential of negative 3,300 advancers minus decliners on the New York Stock Exchange to halt the decline. That makes it slightly overbought. If the market is up tomorrow with breadth similar to today (positive 1,170) that will move to negative 4,000 which makes it overbought (short term).
But let’s look at the chart of the S&P 500. You can see there is a decent amount of resistance in this general area so an overbought pullback would seem natural, wouldn’t it?
Aside from that, the indicators didn’t change much. The intermediate-term indicators are still rising so unless/until they roll over and turn negative, I expect the pullback will lead to another rally.
Sentiment has since crept quietly more bullish. Anecdotally, what I have seen is many who have been bearish have spent the last few days acknowledging "stocks don’t want to go down" or "if the market didn’t go down on the banking crisis, perhaps I need to be less bearish." That sort of chatter.
We see it creeping up in the National Association of Active Investment Managers Exposure where they were at 42 two weeks ago and are now at 64. It’s not that bullish yet but you can see how it might get there in a hurry. As I said last night I will continue to monitor it.
New Ideas
I was asked for a follow up on Amazon (AMZN) , which has some resistance here. I do think it eventually makes its way up to that black line, but if you wanted to lock in some profits after a 10% run, I wouldn’t blame you.
Next I was asked about the exchange-traded fund for gold (GLD) , which I did like again around $170. There is a decent amount of resistance up here and GLD has spent a great deal of the last few weeks milling around. I don’t have a strong sense if it will break out in the coming days or not, but I do know I would not chase it. The Daily Sentiment Index is now 80, so the runway is getting short. It is going to need more work and a better pattern for me to like it again. I would love to see it just trade sideways between say $178-$185 for a few weeks to digest the move.
Today’s Indicator
The 10-day moving average of the put/call ratio has come down very gradually. I’ll call it neutral right now, leaning bullish.
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SNOW Sale: Snowflake (SNOW) is trapped in a trading range with lower highs and similar lows. I am inclined to think I’d be a seller in the near term if or when it fills that gap around $152 and if it can then get to fill that gap around $162 it would likely be around the same time it runs smack into that downtrend line. So those are the levels I’d opt to sell this stock.
Stone Shoulder: If we wanted to be bullish we would say that Blackstone (BX) is forming the right shoulder of a head-and-shoulders bottom. I’m not so sure, but my guess is that spike low from two weeks ago holds for the next few weeks and it’s possible the stock drifts up into that low $90 area where I would probably look to take some profits. Keep in mind it has lower highs on the chart.
Resistance to Energy: I still think we had a decent trade (long) on exchange-traded fund for energy names XLE (XLE) from that mid-$70s area to the low $80 area and we should be booking some profits. The resistance is just quite heavy for my taste.
