It's More Than a Feeling
Let's look at the selloff, sentiment, the bonds, and the charts of Tesla, eBay, and more.
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The Market
There was no question whatsoever about why we went down today: We were short-term overbought, that’s why.
OK, I jest, it clearly is bonds that remain the issue.
What’s more, I had thought the Daily Sentiment Index for bonds would fall to single digits, should the bonds fall again, but I was wrong. For some reason, the DSI remained steadfast at 15.
But my real issue is back to sentiment. My contention has been that if folks get too bullish too quickly, the rally will not last. The Investors Intelligence bulls went up three points to 51.4%. I consider that bearish -- especially, because we were also short-term overbought.
To me, sentiment is a important aspect of the market, which is why I focus on it so much. And I know folks will say, "But these are just surveys." Sure they are, but look at that chart and tell me you don’t see the correlation between too many bulls/too few bulls and stocks. There are clearly too many looking for a year-end rally.
Elsewhere nothing much changed in the indicators. The McClellan Summation Index will require another day of poor breadth to roll back over. The transports, awful as they were, are hanging by a thread. Even the number of stocks making new lows expanded, but are still below their peak for now.
The New York Stock Exchange’s peak reading for new lows was close to 450 and today we had around 250 new lows. If we see the S&P break 4200 (the low from three weeks ago) and there are fewer than 450 new lows, it would be a positive divergence.
For now, the last week has been a big chop-fest.
New Ideas
I want to follow up on a few stocks today. First, eBay EBAY still looks like it could break this level. I would consider myself wrong if it gets over $44.
Dollar General DG has had a terrific run in the last week. The first resistance is not far overhead. I would take some profits here just to book something.
Today’s Indicator
The Volume Indicator still sits at an oversold level.
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.
A Plan for Tenet: The good news for Tenet Healthcare THC is that the top it broke down from measured to around $55 and it has bounced from that area. The bad news is there is no base to speak of and it has some light resistance $58-$62, so I would not expect it to get through that area readily. I would be inclined to sell a rally into that area for now.
Shifting Tesla Chart: I believe we checked in on Tesla TSLA last week and I did not want to chase it on the upside since it had that resistance. Now it finds itself at the lower line of support. Let’s call it around $240. The same way I said I would respect a break to the upside I would respect a break to the downside. It has lower highs and higher lows so to change that pattern (breaking $240) changes the chart. Tesla reported tonight.
DaVita's Island: DaVita DVA has a sort of island top it left behind last week. In the near-term I’d be a seller if the stock got to $85.
