A Long Awaited Rally in Long Bonds
We finally got that move higher in TLT as the Put/Call Ratio creates some worry. We'll also look at AMD, BWA, BA, GOOGL, MRK, and BABA.
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The Market
I had to rub my eyes, blink them several times and I still wasn’t sure I was seeing what I was seeing but, why yes, the bonds rallied! All I needed to do was consider giving up on them!
That was one heckuva rally but all it did was take TLT back to resistance. I want more! And while we may not get more tomorrow I do believe crossing the blue line helps a lot which means we ought to get through the black line sometime in the next few weeks.
As an aside, as I noted last week, I thought the move in the interest rate-sensitive groups were telling us something, but I am still going to pay close attention to the Utes because so far, they still can’t get through that old high, even with the move in bonds today.
Elsewhere breadth has been good although it hasn’t really changed any of the indicators yet. New highs expanded but are still below the prior peak reading for both the NYSE and Nasdaq. Nasdaq has not made a higher high yet, though.
But the Transports made a higher high (and still no one is talking about them). Breadth, too, inched out a minor higher high.
On the sentiment side of things, the put/call ratio sunk to .75 which turns out to be the lowest reading since November 11th. The problem is that preceded that big down week we had two weeks ago.
The S&P and the Russell are now up six straight days and while I know the seasonality says the market should be up this week I would not expect green every day. If we do get green every day then I’d expect a lot of give back next week.
New Ideas
Everyone is talking about IGV vs the SOX. As you know, I turned bullish on software a few months ago and have not liked the SOX for even longer than that. However, when all the love falls away, I notice.
I had been asked about Advanced Micro Devices AMD a few weeks ago and last week I decided it should rally. It has, although not very well. I still think AMD has a chance to rally, although for now it’s just a trade.
I am also still waiting for BorgWarner BWA to break out. If it cracks under 33 this time, I won’t like it anymore.
Today’s Indicator
The 30 day moving average of the advance/decline line will be back to an overbought condition next week.
Q&A/Reader’s Feedback
We looked at Boeing BA a few weeks ago, and I said it was a candidate for tax loss selling, but it ought to lift in January. I haven’t changed my view. The stock has been in a downtrend for so long that it will need to form a base. It would be nice if it stalls around 160 and then comes back to say 150 to show us it has at least eaten through that first layer of resistance.
Alphabet GOOGL probably won’t break that uptrend line in the next few weeks but I’m not so sure it is going anywhere special on the upside either. When I first liked it around 160 the target was the gap fill at 180. I just don’t see anything actionable there.
Merck MRK finally bounced properly in the last week. I had thought it would bounce off 100 so we’re still in the same place. I am inclined to think it crosses that downtrend line but there is no base to speak of so it still feels like a trade.
Alibaba BABAF is bouncing off a very oversold condition where there is support. That’s the best I can say about it now since there is no pattern to speak of.
