Tech and Biotech Dominate Wednesday
The Market
In case you didn’t notice today was all about the tech stocks and FANG names in particular. Oh and biotechs (more on that below).
We did however change the pattern in the market. I was alerted that many read my view that we should change the pattern as meaning we should go down and stay down. But in fact I really didn’t know what to expect, just that the pattern should change. And change it did. We started on a high note and leaked as the day went on. Pretty much the inverse of what we’ve seen the prior three days.
To me, outside of the handful of tech stocks (and bios) it leaves us where we’ve been: in chop mode. The S&P is now down about 13 points on the week. To me that’s a chopfest. It’s working off the overbought reading.
Sure I’d like to tell you it’s bearish but bearish would see negative breadth, something we really haven’t seen much of. Bearish would be small-caps leading us on the downside, something we haven’t seen. What we have is a narrow group of stocks managing to take Nasdaq and the Russell up and everything else pretty much languishes or chops.
Notice though that no one is concerned that the banks can’t get out of their own way. Earlier this week I thought they could rally -- well Citibank (C) -- could rally into the Thursday stress test and early this morning it appeared to be a good call but by the end of the day the Banks faded.
No one seems concerned that the industrials can’t get out of their own way either. Some will say they are down and out due to the Chinese tariffs. Okay. So we know why. Does that mean it’s okay?
Meanwhile Nasdaq made another new high, as did the Russell and the number of stocks making new highs continues to lag.
To follow up on the Russell 2000 discussion from last night. I am unsure if it will stop here (the ratio) or if it will keep going. I am watching closely to see. There is a measured target on the Russell 1720-1740 from this base.
The interesting part of that is this upper channel line on the Russell comes in somewhere in that neighborhood as well.
I find choppy, narrow markets difficult because too many stocks disappoint and too few win.
New Ideas
Speaking of biotechs, IBB is almost at the target I set when I first recommended it a few months ago. That base measures to 116 and there is resistance around 115. I would consider selling some as it gets near resistance.
There is an OPEC meeting that starts tomorrow so the oil sector will likely be in the news. With that as a caveat, the chart of Cabot Oil and Gas COG keeps catching my eye with that small base where the flat line intersects with the downtrend line. I think it can make its way higher.
Today’s Indicator
The Volume Indicator is at 52%. It too is working off the overbought reading.
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. With Canada legalizing marijuana I was asked about the ETF MJ which had a big start to the year and then collapsed. It’s trying to base. As long as it stays over this $29.50 area I would consider it in the process of basing.
Sanofi (SNY) is basing but really needs to push itself up and over $40 to breakout. The problem is that no one seems to want to buy anything that is not small or large cap tech right now.
National Oilwell Varco (NOV) continues to maintain its uptrend. I would like to see it get itself up and over $43 quickly because if it breaks this line that has been in place since February I think it might get ugly in a hurry so the stop is close.
