As the Chatter Turns Back to Broadening Out, Are We About to Be Overbought?
Answering readers’ questions about the bonds and Nasdaq.
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The Market
I was wrong. I thought for sure the chatter would be bearish on the others, but it turns out now that RSP has rallied they are all back in the broadening-out camp! And of course, now that the SOX has been red for four straight days, there are some nerves developing.
The contrarian in me wants to run the other way (back into semis and out of the others), but I will stick with the data for now, which continues to say we should get a bit more of this rotation. We’ll probably see the semis rally tomorrow just because it has been four days and the SOX is nearing its 50-day moving average. But I still think we’re due a rotation out of semis into the others.
On a short-term basis, we will be overbought again midweek. I know we are due to get the inflation data (CPI and PPI) midweek, so it ought to have an effect. But I did not discuss bonds last night and was asked to address them. I still think bonds are bottoming. Thus far that has been the wrong call. But I am sticking with it.
TLT has been creeping upward. You can see it bounced off a trend line. There is light resistance at 78.50, but I expect the serious resistance is at 80-ish. To put that into yield terms, that means 78.50 is approximately 5.20% for the yield on the ten-year. And 80 is around 5%.
If bonds back off, the others should get to rally.
The other question I was asked to address is the chart of the QQQs. I suppose one might call that action midweek last week an island (circled on the chart). Island reversals that start at the top are bearish. But let me note there is support all the way down to 720, which would fill a gap.
What concerns me is that unlike the NYSE where the McClellan Summation Index is trying to turn upward, Nasdaq’s is not. You might recall when I turned sour on the ‘others’ in early August I kept citing the declining Summation Index for the NYSE but the upward-facing one for Nasdaq. That has now reversed.
With my new cautious view on the SOX, I would also lean cautious on the QQQs, although the charts are vastly different, with the SOX at a lower high (than last June) while the QQQs made a higher high.
Finally, with Bank earnings on deck, I think the level to watch is 172.50 on the Bank Index. Get over that and the chart has a good shot at getting near 180. A failure to get over it would be bearish. As a reminder, my pick in the bank group has been Citibank. I would like to see that stay over 125.
New Ideas
I was asked to revisit Procter & Gamble (PG), which I recommended about a month or so ago. It is short-term overbought (having run ten bucks in a week), but it still looks like a base in the making to me. I’d love to see a few down days to digest the recent run-up.
Today’s Indicator
The 30-day moving average of the advance/decline line is oversold.
Q&A/Reader’s Feedback
Before I left, I said I thought if GLD held 385 it would be okay. It did not hold. In fact, I think it was the very next day it gapped under. Yet, like a moth to a flame, I am still drawn to it. If it cannot get up and over 390 in the next week or two, I would give up on it.
KWEB is finally getting interesting again. It’s basically the same price it was a month ago. Get it up and over 25 and it’s a mini-breakout. There is still the spike high at 25.50 to contend with, but the first step is getting over that downtrend line.
I’ve got a lot of lines drawn on the chart of Micron (MU), but let me begin by reminding you my view has changed on the semis; I am no longer a fan. For MU, it’s the failure at 1100 I am concerned about. It’s probably got a little support in the 950-975 area, but it’s better support near 900. I imagine the stock bounces and comes back down again. If it breaks 900, then the blue line comes into play. I’d take profits, especially if it bounces later this week.
ITA, an ETF to be long Aerospace and Defense stocks, is oversold and has support down here. I think it can rally to that 212 resistance area. But perhaps as we get further into the fourth quarter we’ll look at this as a tax-loss candidate.
COPX, an ETF to be long copper miners, is mostly in the middle of nowhere. As long as it stays over 80, it gets the benefit of the doubt, but that’s all I see except that it hasn’t done much in 2026.
McDonald’s (MCD) is oversold enough to rally. The first resistance is close to 250, but I think it can get to 255-260 if we really do get a rotation into the ‘others’.
Axon (AXON) is at support so it ought to rally. 440 is light resistance with 480 much heavier.
Having liked Bitcoin, and therefore Strategy (MSTR) near the lows last summer (the DSI got to 10) I would now lean toward profit taking. I think it is vulnerable for a trip back into that 120-130 area.
My view on Uber (UBER) has been the same for almost all of 2026: we buy the lows and sell the highs of the range. I don’t think it is an easy ride upward (notice how it rallies to resistance near 80 in fits and starts), but that’s the range, and we trade it.
Boeing (BA) is yet another stock in the ‘other’ category that is oversold. A rally into the 200-ish area would have me taking profits.
Marvel (MRVL) is a semi stock, but it hasn’t even tagged its uptrend line yet. I suspect it does tag it. 250 is decent support so I’d like to look at it again if/when it gets there, but I think it is going there (at least)
First Solar (FSLR) broke down badly, but there was no follow-through. But now there is a lot of resistance at 190. If it can get back over 190 in the next 1-2 weeks, I would call this a false breakdown.
Honeywell (HON) keeps trying to bottom, and then it gives way. I suspect it rallies again, but if it can’t get over 217, I’d give up on it.
