The Good News? The Bulls Are Hiding
Let's look at bonds, sentiment and the selling.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Market
Well, we finally got some selling. But did we get any volume? Not so much in stocks as the New York Stock Exchange still didn’t trade more than four billion shares and the Invesco QQQ QQQ saw volume lift from the recent pathetic levels to 69 million shares, but still nothing over 75 million.
Am I being a stickler? Maybe, but when I see volume surge in TLT TLT, but not in stocks I think I am going to surmise that folks were keen to sell bonds, but not stocks. At least not the way I thought they would by now.
Look at the surge in volume on TLT. Why must we fuss over this? Because the Daily Sentiment Index for bonds fell to 13. I think we are gearing up for a bond bounce in the next few days. I would love to see one more day of selling, because I think that would get the DSI to single digits and that coupled with the high volume would scream some sort of capitulation in bonds.
In stock-land, I am still not thrilled with the survey data as the American Association of Individual Investor bulls came in by a mere two points and sit at 31, while the bears moved up 5 to 35%. At least there are more bears than bulls now, but I’d like to see a bit more concern in that survey, similar to the Investors Intelligence data we looked at yesterday.
The National Association of Active Investment Managers Exposure barely budged and is at 54. Sure that’s down from 60, but here too I’d like to see this fall into the 40s at least. I mean folks were more bearish in August than they are now.
The good news on the sentiment front is that it is hard to find a bull — anecdotally speaking. Also the put/call ratios remain elevated as do the various moving average lines. Down below you will see the chart of the 21-day moving average of the International Securities Exchange call/put ratio and that it has started to push down, now hovering at the 1.00 level. Perhaps next week it will get into that .95 zone.
The good news is that support lines are starting to break. The homies broke today. The SOX semiconductor index still sits at support as does the S&P 500 and the QQQ. And energy finally got sold today. When the winners get sold folks are getting bearish.
The number of stocks making new lows surged today, but the NYSE Hi-Lo is still at .33.
Another few days and maybe that gets oversold.
Finally, I haven’t discussed the short-term oversold situation, because we haven’t been terribly oversold short term. Now I want to show you the Nasdaq Momentum Indicator, where I have walked Nasdaq down 1000 points over the next week or so. It starts to turn up on Wednesday of next week (9/27). Keep in mind this is not meant to pick the exact day, but to give us a general time frame.
Today was a big step in the process.
New Ideas
In terms of change, McDonalds MCD finally got sold today. That top measures to $260-$265. Remember when Fan Faves get sold folks are giving up.
Today’s Indicator
The ISE call/put ratio’s 21-day moving average is discussed in full above.
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.
An Array Play: I am quite hesitant in this market to buy a stock that is near its high and Array ARRY is near its high. Here’s what I would do: Buy with a very tight stop (under $23-$24) or if I owned I’d hold with that same tight stop. If it turns south I think it can fill that gap back at $18.
Slow Restoration: RH, formerly Restoration Hardware, RH still has had no bounce from those crummy earnings so I still see no reason to bottom fish it. Next decent support is $260, maybe $270, but as I noted when we looked at it a few weeks ago, the stock doesn’t tend to spike low but rather it takes its time forming a bottom. Don’t rush into this.
Downside of Disney: When we looked at Disney DIS a few weeks ago I was asked what the downside measured target was and it is around $60-$65. But now I am being asked if the stock is a buy. I think it can bounce. I do not think it is going to be easy to rally it far though because of all that resistance overhead and tax loss selling season is coming.
