The Market
Well, we did get a little oversold today with the move down. Had we closed on the lows, I think we would have reached a better oversold reading.
The obvious pluses in today's market include the oversold reading, the Russell finally outperforming, the transports not breaking and the fact that Nasdaq broke last week's intraday low and there were fewer stocks making new lows.
All of these are reasons to have a short-term bounce. But let's think about the indicators. The McClellan Summation Index has made a lower low for Nasdaq. The number of stocks on the NYSE increased over last week's reading, so there was no positive divergence there. The 10- and now the 21-day moving average lines of the ISE ratio are heading down (I will show this chart here tomorrow evening). This couples with the moving average lines of the various put/call ratios that are still heading higher (bearish).
To this I would add that breadth made a lower low. That is something "new." We haven't seen that since the summer and fall of 2014. It might not be that clear on the chart, but you can see in Box A the S&P (brown line) has held its previous lows while breadth (blue line) has broken the previous lows rather handily.
In Circle B from last summer, you can see the blue line (breadth) was heading down while the S&P (brown line) was still trading upward. That divergence, as you know, led to the October decline. Thus when breadth diverges, it's not bullish.
In sum, I do think we can and should bounce, but I don't think the correction is done yet.
I would end with a note on bonds, which have refused to enjoy a bounce. The longer they go without a short-term bounce, the more vulnerable I think they are to the employment number. A pullback would be good for higher rates. The lack of one makes it feel overextended.
New Ideas
Keeping in mind that "high bases" are not what I am good at, I was asked about Broadcom (BRCM) and it has held up rather well during this rout. Therefore, I do think it can at least make a try for that spike overhead (leftover from earnings). If the market were stronger, I would be inclined to think it could break out over that spike, but as you know, I don't think the market is all that strong.
Facebook (FB) was actually green most of the day today. It broke down from a double top about a week ago. That top measured to the $76-$77 area and since it tagged $77 I'll figure that was sufficient for now. A rally back to the $80-$81 area is where I would look to sell it. A rally that stalls shy of $82 will map out a head-and- shoulders top (left shoulder in early March). So a bounce to $80-$81 and then down again is my view.
Today's Indicator
The Volume Indicator is hovering near 50%, so it's not even oversold.
Q&A
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I have been bearish on the retailers for several weeks, but when asked about Ralph Lauren (RL), I found myself drawn to the potential bottom that is developing in the chart. If it got down to the line around $130, I'd probably take a look at it from the long side. It's still a bit early but at least the chart is making higher lows now.
The best thing I can say about the chart of KLA- Tencor (KLAC) is that it hasn't broken $57 yet. A break of that level and the target of $54 comes into play.
Once again there are so many questions on Apple (AAPL). It will be obvious to all that this $122-$123 area is support and a break of this will complete a double top of sorts. I don't know if it will hold or not, but unless it has a very strong rally off this level, I think the best it can do is chop around. If I had a gun to my head, I would think it will try and save itself and break later on. The worst thing it can do now is have a mediocre rally that stops at about $126.
