A Hollow Rally Leaves Me Scrounging for Positives
After an up day with poor breadth, I don't feel great about sentiment. Plus, bonds hit the area I've been waiting for and I look at Starbucks, Palantir, Qualcomm, Citi, BofA and a whole lot more.
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The Market
It’s hard to find what rallied aside from Nvidia NVDA in Tuesday's market. Oh sure stocks like Meta META were up, but overall, breadth was flat. That is worse than the reading on Friday. I thought Friday’s breadth was poor at +760 with the S&P 500 up 51. Tuesday the S&P gained 55 with net breadth at +80.
Someone will say "but the commodities got hit." I would counter, did you see how many semiconductor stocks barely participated? It was more than commodities. In fact, as I look at my notes, I see I haven’t written down one positive indicator for the day. That probably means we rally tomorrow!
Seriously, the McClellan Summation Index is still heading down. The number of stocks making new highs contracts daily now with the S&P almost at a new high and a mere 99 stocks making new highs.
I don’t even know what to do with the options ratios as the ISE call/put ratio was literally off the charts, or almost. It clocked in at 2.04, which as you can see below, is the highest since that spike (I am still not sure if that was just a one-day anomaly) in March 2022. But go back prior to that and you can see it’s not often we get a spike like this.
I have checked the dates and the results thereafter are mixed so I don’t want to fuss too much over it, but couple this with that low 10-day moving average of the put/call ratio and sentiment doesn’t feel great here.
Even the Fear & Greed Index is back to knocking on the door to "Extreme Greed" again.
But we should talk about bonds. The Fed Minutes will be released Wednesday and CPI later in the week. However, TLT finally touched that $94 area that I have been waiting for. I think we get a bounce here.
New Ideas
Now that Palo Alto Networks PANW finally moved Tuesday (I still like it) I thought I should revisit Zscaler ZS, which still looks as if it ought to try and fill that gap. I know it’s quite far away but even that downtrend line comes in there.
Today’s Indicator
The McClellan Summation Index is still heading down. It needs a net differential of +2,400 advancers minus decliners on the NSYE to halt the decline.
Q&A/Reader’s Feedback
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Ever since Starbucks SBUX popped up on the announcement there was an activist, the stock has traveled back and forth between $90 and $100. With the stock at $96 it’s pretty much smack in the middle. If I had to guess, it makes another try to the upside before the downside but that is just a guess and only because it hasn’t gone under $94 on this trip down.
Shopify SHOP should try and fill that gap overhead (from February) but I would feel better about it doing so if the market had gotten to a good oversold condition.
CommVault Systems CVLT has a measured target around $170. As long as it stays over $155 it should get there but the breakout is not inspiring since the stock is having trouble getting to the high of the day.
Kohl's KSS is trying to bottom but it has an awful of resistance to eat through. If it breaks $18 I’d get concerned.
if you are looking for a retailer, I would point out that a few weeks ago I noted that I thought Abercrombie & Fitch ANF was improving. It needs to clear $150 to get going.
Qualcomm QCOM may be under pressure because of the rumored deal with Intel INTC. I don’t love it in the semi area. Use a stop under $162.
In the semi space I might revisit Lam Research LRCX, which has since split 10-for-1 since we last traded it. It is holding this $78-80 area and pulling back rather gently for now.
I liked Palantir PLTR a few months back and it has exceeded my target now. I can’t chase it, all I can do is recommend using a trailing stop. The only price I see now is under $36.
I really want to like the financials and banks again. The Bank Index itself has a big breakout over 115 but it would feel better if the market was truly oversold. Citigroup C is no different: it has resistance all the way back up. I’ll say it feels okay without feeling special.
Bank of America BAC feels a little better now with a clear breakout at $41.
The euro (vs the USD) has support here and should bounce but my guess is it bounces and comes back to retest this area.
