A Huge Rally Today, But Yesterday's Rally Was Better
One of the biggest rallies ever, but the statistics were better yesterday. Plus BIDU, HII, RTX, and EWW.
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The Market
Well, we got a big rally and I know a lot of stocks surged but statistically speaking I believe Tuesday’s rally was better than Wednesday’s rally.
Recall on Tuesday I praised the fact that we had 80% of the volume on the upside. Today it was 66%. Nasdaq had 77% on Tuesday and today it had 64%.
Breadth was similar in that Tuesday it was +1800 on the NYSE. Today it was +650 on the NYSE. Nasdaq was similar.
But the Transports surged to a new all-time high. The banks surged, as did the Russell 2000. And we had a terrific increase in the number of stocks making new highs with the NYSE at 470 and Nasdaq at 660. Those are both impressive. Now if we can only get Nasdaq’s new lows to contract. They expanded again today.
There is a pattern I want to show you in the S&P. I am not usually concerned with patterns or levels because I prefer my indicators but the S&P has left an island down here—that’s those four days from last week’s gap down to this week’s gap up. Typically an island is bullish. This one would measure to around 6000.
Tomorrow, we’ll see what the Fed has to say, and considering how wrong I have been on the bonds, we will have to pay close attention. The DSI is now down to 16 so we have to be close to a bounce. I do hope it does not need to get to single digits.
I am no Fed watcher, and I don’t tend to focus on interest rates as they relate to stocks, but at some point, this divergence will matter. I am in the camp that rates come down, but so far that has been the wrong play.
New Ideas
I want to revisit Baidu BIDU, which I was asked about two weeks ago. I thought it would bounce and retreat, but then I started thinking that the move back down could be buyable. I think the pattern is starting to shape up again.
Today’s Indicator
The Volume Indicator got to 49%. Today it stands at 51%
Q&A/Reader’s Feedback
Huntingdon Ingalls HII has some bit of good news in the recent collapse: it hit the measured target on that gap down. Now it can begin the process of rebuilding a base. I imagine that will take some time. We ought to see it start to hold on pullbacks in the 190-200 area.
I look at the chart of Raytheon Technologies RTX and I see the potential for a head and shoulders top. So, for now, it’s a chart I would not chase or buy. But we often see this, and then the stock comes down to the neckline and starts to hold instead of breaking. Let’s see if it comes back to 117-118 and holds.
If you want to be bullish on the iShares Mexico ETF EWW, then the reversal today off the line would help. For my part I would say it has had this sort of reversal before but there has not been a bottom to speak of. My guess is the first trip up to 54-ish it struggles. So a trade to 54-ish.
