After 10 Days of Chop, Can We Finally Break the Pattern?
The Market
Considering breadth was the worst it has been in a month there really didn’t feel as though there was much selling taking place. In fact, before I left last week I noted the S&P 500 had gone every other day up/down/up/down, and I even joked Friday ought to be up. Had I been around this weekend I would have joked Monday should be down. The end result is that for 10 straight days we have not had consecutive up or down days. Chop.
The biggest change to me is that bonds finally moved and did so in a big way. I have been looking for (TLT) to come down to that $94 area for several weeks now and we’re finally getting close. TLT is getting oversold and today everyone started talking about them. My guess is we get a bounce in the next one to three days.
The DSI for bonds is currently 37 so it’s not low enough for me to think folks are bearish bonds yet. For now I’m just thinking bounce.
To go along with the bonds, folks finally sold their Utes. If we use (XLU) we can see it is still in this channel it has been in since July. My view is that before this rate move is over this channel breaks. Maybe not Tuesday but it ought to break at some point.
For the market as a whole, as I said, the selling wasn’t particularly strong. It would be nice to break the pattern of up/down/up/down Tuesday so the market can move to an oversold condition. If we can get a few more red days this week we will be short-term oversold early next week.
The intermediate term is not oversold but the Nasdaq Hi-Lo Indicator has moved down to 0.61, so it is heading there.
Finally, sentiment continues to be complacent, in my view. Heck, Monday’s put/call ratio was 0.79. I should remind you that today was a down day in the market. The 10-day moving average of the equity put/call ratio is now the lowest it has been since summer of 2023. It is not that extreme yet but it’s lower than it has been since then.
New Ideas
Our friend Twilio (TWLO) finally filled that gap from February Monday (and did so on volume). There is a measured target around $74 but I would err on the side of taking a few profits and letting the rest run
Exxon Mobil (XOM) has had a nice run as well. It measures to $130-132 but it looks a bit stretched now.
I am once again warming up to Abbott Labs (ABT) . I am a bit early because it probably needs some more work in this $110-112 area for a few weeks but it has improved again.
I was asked for a target on MP Materials (MP) , which I recommended a few weeks ago near $14. It’s got resistance up here so if it can’t get up and over $18.50 in the next few days I would take the money and run. If it can get over it then we’re looking at the next target around $20.
Today’s Indicator
The 30-day moving average of the advance/decline line has come down quite a bit but is not yet fully oversold.
Q&A/Reader’s Feedback
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I would say that Enovix (ENVX) is going to run into resistance in that $13-14 area so I would be inclined to take something off the table there.
I don’t love gold or gold stocks right now but Alamos Gold (AGI) should bounce off this line. It has done so every time since June. I would get concerned if the stock can’t get up and over $20.
Intuitive Surgical (ISRG) has a feeling of a stock rolling over. If it breaks this $470 area I’d get concerned. The top is not that large but it does measure to around $450-455.
JPMorgan Nasdaq Equity Income (JEPQ) is an ETF for Nasdaq Equity Premium and I would say it’s probably in a range between $52 and $55. So if it fell to $52-ish I’d probably take a look at it down there.
ProShares Bitcoin Strategy (BITO) , is an ETF to be long Bitcoin and it looks like it is stuck in a range. If Bitcoin is a measure of how speculative folks are feeling about the market then I’d say they are not feeling very speculative right now. If it comes down to $15-16 I’d have to take a look at it to see if it was holding.
If I liked the market better I’d be a fan of Lyft (LYFT) around 12. So I’d say it’s a buy near $12, but I’d use a stop not far under there for a decent risk/reward.
Futu Holdings (FUTU) is very overextended so if it were me, I’d take some profits. On a long-term chart (not shown) there is resistance not far above. Most of the Chinese stocks look this way and are starting to feel vulnerable to a correction or at the very least a flag.
