Oversold and All Over the Place
The Market
I would like to tell you the indicators changed after the action in the market today, but the only change is that now the New York Stock Exchange is finally joining Nasdaq in being oversold.
So, to reiterate, we are oversold. There are fewer stocks making new lows (so far) by a wide margin, especially on Nasdaq.
But today I want to get to sentiment. The Investors Intelligence bulls slipped to 34.9%. Unsurprisingly, that is the lowest reading since March 2020 when the bulls slipped to 29%. So, sure, there is room to see them lower (in 2008 they got to 22%) but this is getting stretched on the "not bullish" side.
I don’t say too bearish, because the bears are up to 27%, which is the highest since the spring of 2020, but as you can see the bears stretched up over 40% back then.
Investors Intelligence considers those in the correction camp to be primarily bullish, but I prefer adding together bears and correction-minded folks to get a sense of how many do not like the market at this moment in time. My line in the sand tends to be when the two added together get to 65% or more we are a bit stretched sentiment-wise. Today the two chimed in at 65%. Again that is the highest since the spring of 2020. Prior to that we saw that similar level in December 2018. We got this up to 75% in January 2016 so sure it can go higher, but combine this with an oversold condition and we really ought to rally.
Now I have one caveat. We are coming up on the end of the month and it has been a terrible month in the market. Throughout 2021 we always enjoyed a rally on the first or second day of the new month, which would be next week. I’m not sure we would wait that long to have a rally.
I will end by reminding you that even if we do manage to rally and hold on to it (we should hold on to gains for at least a day or so) I still think we are in a market that will bring more volatility over the coming months. If you don’t like your stocks, use rallies to sell them. This is a trading market.
New Ideas
I was asked about Nvidia (NVDA:Nasdaq) today and if you bought it, this week where would you sell it? At $260 is resistance, but clearly if it turns south before then, then this week’s low is your stop.
Today’s Indicator
The Volume Indicator is no longer overbought. It is at 48%. It’s just not oversold yet.
Q&A/Reader’s Feedback
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MercadoLIbre (MELI:Nasdaq) has a next measured target around $900. Right here I don’t have a strong view except that it is at the bottom of a channel, so it should bounce, but with so much resistance all the way up, it’s hard to get excited.
Technip FMC (FTI) is trying to base but it’s early. There is a lot of resistance all the way up so for now I’ll call it a range between the lower line at $6 and the resistance zone at $7.50-$8.
Diamondback Energy (FANG:Nasdaq) is knocking up against resistance. The DSI for oil was at $85 on Tuesday evening, so if it gets at/near $90 again this week I’d expect this to pullback again.
