Are the Transports a Canary in the Coal-Mine While Investors Remain Complacent?
The Transports just had their fourth straight red day and were down nearly 2% Tuesday. They are down on the year and gearing up to test the recent low. And no one seems to care.
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The Market
Let’s talk about the Transports. Why? Because they just had their fourth straight red day and they were down nearly two percent today. They are down on the year and gearing up to test the recent low. And no one seems to care.
This has been going on for months and it hasn’t mattered but I am more interested in the fact that the folks on television don’t even talk about. I do believe at some point there will be something that takes the market down and all fingers will all of a sudden point to the Transports (similar to the hysteria a week or so ago about the consumer) and that will be the point that the Transports will be worth bottom fishing. In the meantime, put them on your screen. This is IYT IYT which is an ETF for the Transports. It does not look the same as the actual Transports but similar.
I am going to once again review the indicators because breadth has been slipping of late and while it hasn’t changed the indicators at all, the McClellan Summation Index now needs a net differential of -700 advancers minus decliners on the NYSE to halt the rise. That is within striking distance now. By that I mean a decent down day will halt the rise. The chart is shown below.
I would give you some good news on this front: the Oscillator has backed off from that overbought condition.
Then there are the new highs which did not expand again today. But the number of stocks making new lows did in fact expand. In fact they have been expanding for a few days now,enough so that the ten day moving average of new lows on Nasdaq (also the NYSE) has turned upward.
The market has become so focused on Nvidia’s NVDA earnings that it seems folks have taken their eyes off of everything else. I’d call it market complacency. The bottom line is there has been some minor shifting in the indicators but I’m still inclined to attribute it to the overbought condition. We’ll see if that changes in the next few days.
New Ideas
Long time readers will know I have an affinity for down and out stocks. I also like it when they plunge, rally and then come back gradually to retest and Nike NKE is doing just that. I like it because the risk/reward tends to be good. You know where you are wrong and the stop is close by.
Today's Indicator
The McClellan Summation Index is discussed in full above.
Q&A/Reader’s Feedback
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The chart of the iShares Russell 2000 ETF IWM has lagged the other major indexes but I continue to think that is the overbought condition working off. The question of whether or not it can breakout over 210 is all about the indicators. If the indicators can get back to an oversold condition without much damage then yes. But if they can’t then no I don’t think a breakout is imminent.
I keep waiting for Dover DOV to pullback to the line and it doesn’t manage to do so. It’s in an uptrend so unless/until it breaks the line that’s it. It is not my style to chase it though.
General Dynamics GD is also a stock in an uptrend. It’s got a little support at 290 but at this point it would have to break that spike low around 275 to do something wrong. I call it a hold.
IBM IBM should fill the gap now that it is so far into it. Also filling the gap would be bumping up against that downtrend line. So in the near term I am a seller there.
The best thing I can say about Baxter BAX is that there is a measured target around 32 so I would expect it to bounce or at least make an attempt to hold once it gets down there.
McDonald’s MCD really had a chance to improve the chart last time it was down in the 265 area and bounced. And it failed to even get to 280. Stocks rarely break on the first trip to a low but the second or third are a coin toss. I am almost cheering a break because then we can see what’s down there and how much selling we actually get. With the stock already having made its high five months ago a break may be a final flush.
