With Friends (Stocks) Like These, Who Needs Them?
When stocks don’t play well with you, we retreat for a while, hoping time will heal the wound. There are a host of names doing this same thing right now.
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The Market
Yesterday I described the market as sloppy – or was it sloshy? Either way today was no different. There is just a lot of drooping going on. In fact, there are a host of stocks with an interesting pattern: a spike up and then just slowly leaking back to where they started. It’s as if investors have no desire to really hang on to those stocks.
Take Home Depot HD. That gap up last Thursday got folks excited. Friday gave it back. Monday filled the gap — and still no rally. And now we’re under where we were at Wednesday’s close. Oh sure, there is support here but who wants to get involved when stocks act like that? I would bet you all have stocks that did the same thing. Might as well just keep your money in the bank and collect your 4-5%.
Is it because we got overbought late last week? I think so. Is it because despite all the broadening out chatter, most stocks have been lethargic? Probably. When stocks don’t play well with you, like any friend that disappoints, we retreat for a while, hoping time will heal the wound.
We still don’t have breakdowns, though. We did retreat from the upper channel I drew in last week. Squint and you can see that since that day we have closed at or near the low each of the last four days. Now we have the next test: that uptrend line. It comes in around 5150.
Is it possible we don’t get there? Sure. But consider this: What if we get there and break it? Can you imagine the change in sentiment we’d see?
I am already hearing chatter about how terrible the market acts. All that complacency would go right out the window. All those folks who shrug at the stocks that go nowhere would probably start talking how we need a 10% correction. We might even get a little panic.
We’ve not been able to get that sort of action all year but I can keep on hoping because I think it would be healthy.
New Ideas
I want to remind you that I still think this 4800 area on the Philadelphia Semiconductor Index (SOX) is important. It fills the gap. A bit lower than that (4780), it meets the uptrend line. A failure to bounce from there would/should lead to a better correction.
Today’s Indicator
The McClellan Summation Index is heading down but with about the same lack of gusto it headed up with. It needs a net differential of +800 advancers minus decliners on the NYSE to turn it back up.
Q&A/Reader’s Feedback
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Masimo MASI is the sort of chart I would normally say is a base, or working on one. But lately we’ve seen these one-day spikes and they give it back. In a healthier market a stock like this would give some back, regroup and rally again. In this market we never seem to rally again but rather we give it back and sit there. So unless something changes I’d be a seller on rallies.
I have had my eye on Whirlpool WHR as a stock trying to bottom. It crossed that downtrend line but now it sits there. There is a lot of resistance all the way up. Short-term, $120 is the heaviest. I’d be a buyer as long as it stays over this $110 area.
I am not bearish on energy but as I said last week, it seemed time to take some profits in XLE. VanEck Vectors Oil Services ETF OIH is no different. In fact, it has lagged XLE on this rally. I would take something off the table here and look at it again around $310-ish and make a decision then. Energy picked up too many friends in the last week for me to be comfortable with it here.
