A Big Test Coming Up for the Industrial Sector
Let's review action in the banks, the industrials, software, and a surprising move from Europe. Plus, answer your questions.
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The Market
What a selective market we’ve got on our hands this week. Breadth has been red three of the last four days and the one day it was green it was +50 which may as well have been red.
I know banks were up today but consider the last week, they were down. The Transports have been red for six of the last seven days, down nearly 5% from the high. The Utes have stumbled (still bothersome to me), the REITs, the Homies, the semis rallied but still, they have been awful (the good news is no one seems to like them anymore; remember when semis were the be all and end all?!).
Look at the Industrials. If you bought the day after the election, you’re about even on the trade. There is a big test coming up now because this line has been rock solid since August. It should bounce from the line. If it doesn’t there’s a (negative) message in that.
Everyone loves software now. They talk about software the same way they loved semis in June. I have nothing against software. You might recall I liked IGV back in September as I anticipated that breakout from a long sideways all year. But now? It’s over-extended and could use a rest. It would be great if a new pattern would show up.
As for today’s crummy action, breadth was poor and the McClellan Summation Index stopped going up. It hasn’t rolled over yet. Much probably depends on the market’s reaction to the Jobs number tomorrow morning. I am still looking for a pullback with a bout of volatility next week.
The most important indicator to watch now is Nasdaq’s new lows. They really cranked up again today to 140, the highest reading in two weeks.
I would note sentiment but gosh if I didn’t see a ton of folks out there today all of a sudden caveating their bullish stance with lines about how bullish sentiment is. I guess it’s gotten to the point that it’s no longer something to ignore.
One final note is that I do continue to search for what is down and out. Last weekend I suggested Europe, with France in particular was worth a shot. The news from there is terrible, with the government’s no confidence vote. Yet look at EWQ and how it has managed to recapture that breakdown. Odd no one is talking about it yet.
New Ideas
Another chart I was quite fond of back in September was QQQJ. It basically had the same pattern as the IGV. It has been a nice move up and while it hasn’t done anything wrong, here too I would like to see a correction. A move back to 30.50-31 would be a plus.
Today’s Indicator
The ten day moving average of the put/call ratio continues to mill around at the lows.
Q&A/Reader’s Feedback
Adobe ADBE is a stock I have liked for about a month or so now and I am still waiting for it to fill that gap up near 560-ish. A stop under 520 feels far away but that’s what I see.
I don’t know why LVS looks better than Wynn WYNN but it does. I would take a look at WYNN if it pulled back toward that 85 area because we have the early November low and the uptrend line there.
I don’t love the banks right now but I did hop on the European train a week ago so I will just note that there is a bit of resistance 33-33.50 for UBS and the next measured target is near 35
Lyft LYFT should find some support around 14-15 but I am not a buyer. I think the stock already had its oversold rally from when we looked at it in early October and I was a buyer at 12.
Johnson and Johnson JNJ has been one of my biggest disappointments this year. I caught the rally off the July low but thought that early October pullback to 158-160 was buyable and I have been so wrong. I see support around 146 now and there is a measured target around there as well. So perhaps it gets a 2025 boost.
Could Diamondback Energy FANG hold the blue line or does it need to come all the way down to the black one that has been nailing every rally this year? I would be a buyer at the black line. If the market gets back to an oversold condition and the blue line (165-170) is still holding then I’d probably be willing to take a stab there.
I don’t love the banks here so Bank Of America BAC is in that category. It had a measured target around 48 so now I would like to see it do some work and build another pattern before I like it again. See the way it spent August and September building a pattern? That’s what I would like to see set up again.
We have looked at Novo Nordisk NVO several times where I have noted the head and shoulders top it broke down from in September measured to 100. So the price area is right but it probably takes some time to build a base again.
