The Laggards Get Some Love
A rally in the others has taken many of those often-talked-about divergences off the table, but it didn't change everything. Here's what to know as we head into the CPI report Tuesday.
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The Market
I was convinced last Thursday that we were hearing too much about the divergences in the market and that we probably needed a rally in the 493/others to take those divergences off the table. We’ve gotten that.
But here’s where I am wrong: the rally in the others hasn’t made folks more bullish. Because it has come at the expense of the big-caps taking a breather. So now everyone owns the big-caps and is chasing the 493 and they are not sure if they should be excited or not!
Statistically, breadth was great. The NYSE had 80% of the volume on the upside. The McClellan Summation Index even turned up. One harsh down day and it will be sent lower yet again, but it did turn up.
The number of stocks making new highs increased but is still far below the December readings for both the NYSE and Nasdaq.
Then there is the VIX. As you know the Daily Sentiment Indicator (DSI) for the VIX got to 10 last Thursday and Friday. Today the VIX was up a point, which is quite a bit for a market that was barely red, so the DSI jumped up to 15. The DSI for the S&P 500 and Nasdaq crawled back into the 70s. Oh and the put/call ratio jumped to 1.04.
What I think we witnessed today was folks coming after the laggards, which I would say, from a sentiment standpoint, they are willing to take on more risk to do. I’ll also say it means folks are still pretty bullish.
I want to end with one comment on the bonds and the Utes. Last Thursday I said I thought the Utes should bounce and they have. But I was waiting for the bonds to have one more hit. Tuesday morning we will get the CPI, which everyone expects will be tame. I don’t know how it will come in but I do think bonds are due a rally this week, especially if iShares 20+Treasury Bond ETF (TLT) can crack to the $92 area and reverse.
New Ideas
I was asked if there are any bases in some of the technology stocks and I keep searching. Skyworks Solutions SWKS -- on this weekly chart -- is working on one. If you want to anticipate then you use a stop under $100-ish and hope for a breakout over $120.
Roku ROKU finally got through $95. Now I would use that as a stop.
Today’s Indicator
The 30-day moving average of the advance/decline line is a little oversold.
Q&A/Reader’s Feedback
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I don’t normally comment on stocks that are under $5 but I will comment on New York Community Bank NYCB, which collapsed in early February. If I look at it as a pure chart then I would say if the stock backs off and forms a "W" pattern over $4 then it probably would be worth a trade for a rally. But that is the best I can say about it now.
Waste Management WM has a measured target around $190-200, which it has achieved so I’d take some profits here, but unless/until it breaks that uptrend line it hasn’t done anything wrong.
Dollar General DG would be a great trade going through $140 because it should then look to fill the gap at $150.
On Holdings ONON is trying to shape up into a decent chart. I’d buy a pullback toward $28-29. In the sneaker world I remain a fan of Nike NKE, which I recommended here about two weeks ago.
