A Big Test as XLI Becomes Short-Term Oversold
Can XLI Rally? What about the Transports, which have given up their entire post-election rally? Plus, reader questions.
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The Market
The leakage continued, but tomorrow is the big test because XLI is now at the line. Can it rally? It is short-term oversold.
But away from the next few days, let’s get back to what we’ve seen that no one is talking about. The Transports are down six straight days and have lobbed off 5%. Not a word from anywhere. Six straight days says oversold to me. They have given back the entire post-election rally.
The Utes are down 6% and have been red for nine of the last eleven days. Keep in mind, this is while the bonds have rallied (although not today). And no one even bothers to mention it.
The DJIA isn’t down that much but it has been red for five of the last six trading days. I could go on but the reversal in the newly loved stocks today was not the start of this correction, it was them playing catch up.
If you want some good news, I can tell you that since the index movers are the ones that got sold today it allowed the rest of the market to hold its own, even rally a bit so the number of stocks making new lows did not increase for the first time in a week.
But folks are quite bullish because the put/call ratio came in at .78. No one seems to think the market can go down. I maintain that a correction now probably still sets us up for a Christmas rally, but the sentiment needs to change, and so far, it hasn’t.
New Ideas
Let me reiterate that if XLI can’t rally in the next day or so, there is really a change in the market dynamics even if we don’t see it yet.
I need to start with Advanced Micro Devices AMD where I have been very wrong to think it could rally to 150. There is support in this 130 area, and that spike low from August probably keeps it contained for now, but that is weakness.
I was asked what my target on Alibaba BABAF is. I would say there is resistance in that 95-100 area. My preference is still Baidu BIDU because there is a base there. The resistance at 95 is clear but if it spends a few days milling around here it ought to be able to get through. Under 90-ish and I’m wrong.
Today’s Indicator
The 30 day moving average of the advance/decline line should run out of steam by the end of this week.
Q&A/Reader’s Feedback
We did a good job identifying the top in Coca Cola KO in September. Now the question is if it is down enough to buy it back. I think it is down enough for a bounce. I am not so sure that it is down enough and sufficiently based to rally back to the highs. For now let’s say it’s trying for form a W for a bounce.
Vail Resorts MTN is a chart trying to bottom. It has a measured target around 215 and you can see resistance begins a bit at 200 but much more at 210. If it can stay over 185-190 I think it gets to resistance/target area of 210-215.
Canadian Pacific CP is oversold enough to bounce, but there is too much resistance all the way up for me to think there is anything long-lasting until a base is formed. The first thing it needs to do is cross that line.
Occidental Petroleum OXY used to be so reliable in that you bought it around 56 and sold it in the upper 60s but then it dropped out of the range and went into a downward spiral. It’s oversold but if it can’t recapture 50 in a hurry, then I think it’s going to the low 40s. Recapturing 50 gives me hope that this last push down was just tax loss selling.
As someone who loves to bottomfish Universal Display OLED has my eye. If it can hold this 150-155 area into year end I would think it gets a January effect bounce.
