This Chart Should Keep You on Your Toes
The Market
The choppiness in today’s market was pretty much to be expected. Indicator-wise not much changed. The McClellan Summation Index ticked up for the New York Stock Exchange, but Nasdaq’s is nowhere close to doing so.
The breadth of the market was positive, while the S&P 500 was down, something that I have said the market needs. It needs more of it, though!
Overall, though, my view on the market hasn’t changed much. It’s been a mostly crummy oversold rally and it’s been a giant chopfest.
There is one indicator I need to discuss, though. The International Securities and Exchange Equity Call/Put Ratio was very high today. It chimed in at 1.7. I don't discuss this indicator as much as the CBOE's put/call ratio, but every once in a while this one is worth visiting.
Before we get to the one-day reading, we did look at the 21-day moving average of this metric recently. Well, we looked at the 21-day moving average of the total call/put ratio, because it had fallen so much and continued to fall.
Unlike the put/call ratio, where the moving average tends to move inverse to the market, this one, because it is a call/put ratio tends to move in the same direction. That very high reading forced the 21-DMA to turn up. Generally speaking, that has led to more rallying in the market.
Yet, I feel compelled to share with you the seven times in the last year that this ratio was 1.7 or higher. What’s fascinating is that, with the exception of June, all other times it was at or near a high in the market (see all those blue arrows on the chart of the S&P). In mid-April last year (green arrow) we got a quick 100-point rally in the S&P before heading down in meaningful fashion.
The bottom line is only once in the last year was a high reading bullish. So be on your toes, considering in the short-term, we’re no longer oversold.
New Ideas
I am starting to see some charts with these tiny "W" formations. The exchange-traded fund for uranium stocks URA (URA) has one. If this stock can get through $19.50, then it should have a decent run toward $21.
Today’s Indicator
The McClellan Summation Index is discussed above. It has hooked up. It now requires a net differential of negative 1,100 advancers minus decliners on the NYSE to turn it back down.
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 SLI Trade: Standard Lithium (SLI) looks as though it is trying to bottom, but mostly I’d call it a trading range between $3 and $5.
LAC-luster: Lithium Americas (LAC) is lackluster and I would think the risk/reward is OK here because under $20 and you are wrong, otherwise it’s a trading range between $20 and $25/$26 for now. Until there is a higher high that’s what I see.
Diamondback Looks Rough: Diamondback Energy (FANG) should run into some resistance around $135-$140, so I would be inclined to take some profits up there. I would use a stop under $120.
