A Lot of Selling, But Not a Lot of Panic
The Market
By now it must be oh so obvious to everyone that my call last Thursday evening saying that we could head into a Now Mag 7-type market has come to fruition. But the point is it has taken exactly three days for everyone to see it.
Wednesday I heard folks mention the Transports! Not the Utes, except maybe in passing. But they did seem to notice the small-caps and the equal-weight indexes. Yet was there any panic? None that I saw.
Had there been panic the downside volume would have been 90% of total volume and instead it was 80%. That means we’ve had quite a bit of selling but not necessarily panic.
The DJIA, the leader on the downside, has now been red for five of the last six days and is just over 1,500 points lower than it was just over a week ago. So far, bearishness is creeping in but no panic.
But the question is are we oversold?
I can make the case that the DJIA is a little bit oversold, but based on the after-hours action in one its high-priced stocks, Salesforce (CRM) , it looks like there will be more selling Thursday. There is a little gap to fill around 38,250 (approximately another 200 points lower than where the DJIA closed). There is a decent support line around 38,000. I realize it’s a wide range but that 38,000-38,250 area seems like a place for a bounce.
Now this is going to be difficult to explain but I think "bounce," not oversold rally. To get an oversold rally I would need some extremes on my indicators, as we had in late April and I just don’t have that yet.
Consider that in late April the Investors Intelligence bulls were in the low 40s; now they stand at 58%. I do expect the AAII bulls will have pulled in their horns when released Thursday but they were 47% last week and in the low 30s in April. I don’t imagine they will fall that far that fast.
Then there is the (IGV) , the iShares Expanded Tech-Software Sector ETF, which, thanks to the CRM inclusion, ought to go down even more Thursday. That will make the spread between the semis and software even wider.
I continue to believe that the IGV has been the leader by a few weeks to a month or so. While Nvidia undefined hasn’t done anything wrong yet, it is at a measured target and several of the others did see selling Wednesday. I am still in favor of taking a few profits here.
New Ideas
I want to follow up with the folks who asked about (COPX) (Global X Copper Miners ETF) recently. It hasn’t broken that uptrend line but it has now had what might be a failing rally. A break of that line and I’d get off the copper train.
Today’s Indicator
The Volume Indicator is at 53% so it leans overbought not oversold.
Q&A/Reader’s Feedback
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PayPal (PYPL) had a chance to fill that gap left from last summer and it couldn’t do it. Now it has come down in a straight line and broken the April low. Sure it’s a little oversold, but on a rally back near $64 I’d be a seller.
Raytheon (RTN) had the chance to make a higher high last week and did not. Now it looks like a very small head-and-shoulders top, suggesting to me it should come down and tag that uptrend line.
J.B. Hunt Transport (JBHT) is oversold enough to rally. But where is it going? A bounce to $160 is quite doable. I’m more curious to see if it can bounce to $165.
