We Finally Got a Down Day and Breadth Went Down Too

The Market

We finally got a down day and breadth went down too. This is important but we’ll get to it in a bit.

As far as the charts go there has been a lot of churning over the last week. You might recall about a week or so ago I said that these choppy markets are the sort that for me are a recipe for losses because what goes up here goes down there, etc. That’s been happening in many charts. Today that continued in some charts –meaning there was no selling but they are just spinning their wheels. But in several others they are starting to have that rolling over feel.

Let me note typically I am early on this, when stocks start to feel as though they are rolling over, they end up with one more rally. It’s not necessarily groups but some individual stock names. The one group that stands out to me is the semis. I think they are over owned and over loved and while they did not sell off much today and probably have another rally in them sometime soon, there has been a lot of churning in several of the names.

As far as breadth goes the reason it is important is the same as always: weak breadth changes the indicators. For example, the breadth on the NYSE was -700 which is not bad for a day the S&P was down nearly 10 points. But please note that the McClellan Summation Index now has a cushion of -1,000 advancers minus decliners before it stops going up. So one more down day would do it. And that would be the first time since the Christmas low.

We may very well rally tomorrow. In fact I wouldn’t be surprised if we did. Will breadth go back to its winning ways? Down below you will see a variety of stocks in several industries that need to be watched. If charts start breaking down new lows will expand. I think it’s too early for that but it’s what I’ll be watching in the weeks ahead.

New Ideas

Let’s start with the SOX, by looking at SOXS which is an ETF to be short the semis. That downtrend line is quite steep but if it crosses it then I think SOX can get to $8.50-$9 within a month or two.

I continue to think Gap (GPS) is vulnerable if it breaks down under $24.50.

Then we have charts like TripAdvicor (TRIP:Nasdaq) which broke today. I suspect it bounces off $52-ish but can it cross back over $56?

Then there is a chart like EOG Resources (EOG) . It should hold $90-$92 on this trip down. But if it doesn’t then it is likely the oils will roll over.

Today’s Indicator

The 10-day moving average of the put/call ratio remains quite low but refuses to turn up.

Q&A/Reader’s Feedback

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Just over a week ago I gave Disney (DIS) the nod that it was okay to buy with a stop under $109. It has since rallied to resistance and the question is what is the target? The problem is there is now resistance all the way up. I would probably sell some around here ($114-ish) because there is resistance here. Unless/until it can cross $114 and hold on to it, we have to assume it is in this range. If it can cross over $114 and hold it then I think the next target would be $117-$118 but that’s a lot of resistance to eat through.

In early January I recommended Valero (VLO) and the initial target was $83-ish. It had a decent run but the question is if it is buyable now? Not for me. Should it be able to go sideways and stay over $82-ish for a bit I might warm up to it again but considering the DSI for crude oil was $93 yesterday I have a hard time wanting to buy oil or oil stocks here and am more inclined to take some profits.

Overstock.com is one of those stocks that keeps sucking us in and when it turns back down it does so in a hurry. If the chart can pull back toward $17 and hold perhaps it gets more interesting. I suppose if it holds $19 and rallies the momentum folks will like it but I prefer to see it break and have a shakeout because chasing this stock has done me no good.