After Terrific Run, United Airlines Seems Ripe for Profit Taking
Plus, it might feel like stocks only go up, but there's reason to believe there is some weakness under the hood.
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The Market
Note: I am taking the remainder of the week off. The next edition will be on Sunday evening.
Happy Thanksgiving to all who celebrate!
Everyone seems so excited that the market didn’t collapse on the tariff news. It didn’t. But the RUT have back half of what they gained yesterday, so something cared about it.
The utes came back but haven’t quite broken out yet. Let’s keep watching that because I do think it’s important for the bond story. That is, if I am going to be correct that TLT has another rally in it.
There are a few items to highlight today. Let’s start with the McClellan Summation Index. It turned up last week but look at it: the indicator has hardly budged to the upside while the Russell eked out a higher high. This is highly unusual. It is still heading upward but another day of poor breadth like today and this will halt the small rise.
The number of stocks making new highs fell off a cliff today, which is to be expected as the Russell pulled back. But notice that we’ve got the S&P at new highs and the number of stocks making new highs is contracting while new lows are expanding.
What this tells us is that the foundation underneath might feel as though stocks only go up (it starts to feel that way after seven straight up days) but there is some weakness under the hood or at least a lot of going nowhere.
Finally, let me note that the VIX sunk today. There is talk that if it holds 14, it is bearish and if it breaks, it is bullish. That is not my take. I would like to see the VIX fall a bit more but mostly I am focused on the DSI which is 14. If the VIX falls more the DSI is going right back to where it says "expect volatility."
New Ideas
United Airlines UAL has had a terrific run since August. It also completed the 90/100 rule today and reversed to close flat. This feels like a stock that is ripe for some profit taking.
Procter & Gamble PG has been terrific since I liked it 10 day ago. But you know what? It’s been green 10 straight days. That makes it overbought now.
Today’s Indicator
The McClellan Summation Index is discussed in full above, along with its chart.
Q&A/Reader’s Feedback
NVIDIA NVDA has some support here, more at 130 and then at 120. So, maybe it bounces from here but I just don’t see a reason to buy it. Do I see a reason to sell it? It looks to me as if it is trapped between 120 and 150 now so it’s pretty much in the middle of the range.
Constellation Energy CEG is closing the gap from earlier this month and is coming into resistance from the downtrend line. I suspect that line stops it on the first trip up there but mostly the chart hasn’t done much wrong. If it wasn’t able to fill that early November gap then it would have left an island overhead but it didn’t. It had an upside measured target around 280 so right now I’d say the stock looks mostly neutral to me until a pattern emerges.
Marvell Technology MRVL reached its upside target when it tagged 90. There might be one more rally toward 100 for the 90/100 rule to finish up (90% of the stocks that make it to 90 will make it to 100). I’ll call it a hold with a stop under 87.
If you wanted to nibble on Enovix ENVX, I wouldn’t argue against it since if it breaks that uptrend line you know you’re wrong so the risk/reward is decent here.
Bank Of America BAC hasn’t done anything wrong and it has a measured target around 50. It is over-extended here though but that’s the worst I can say.
JP Morgan JPM has met its upside measured target in the 250 to 260 area but it hasn’t done anything wrong. I would err on taking some profits here but that’s the worst I can say about it.
