Expecting an Overbought Pullback
We check in on the interest rate-sensitive parts of the market and answer your questions.
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The Market
NOTE: My Twitter account was hacked this past weekend. It seems there is not much I can do about it, so if you are looking for me on Twitter, my new handle is @chartfest1. I do not plan on posting much there though. I prefer to post under my own name, so I will post more on Bluesky using the handle @hmeisler.
A week ago, I noted the Utes had gotten back to the high (at the time, I thought this would be bullish for the bonds) but they had stalled out. I thought it was important that we focus on them since they were seemingly the leaders.
The Utes were down two percent today. Yet bonds were flat (TLT was up). My guess is the Utes will back off and rally again but a 2% decline when there was really nothing going on in the market is a warning to me.
TLT was up on the day but got right to that resistance area (94-95). I think TLT can see a pullback from here, so if you wanted to take some off the table, I wouldn’t argue against it too loudly. I suspect we see a pullback and another rally in the bonds but TLT is overbought now.
The banks were also weak today. They have support on the Bank Index at 133-135 but my guess is they are in desperate need of a correction as three out of the four days last week they closed near the low of the day.
But the semis rallied. Finally! Advanced Micro Devices AMD has a little resistance here but resistance is much more severe at the 150 area.
It’s getting harder for me to find down and out groups now which probably means we’ll see an overbought pullback in the next week. The DSI for the S&P is at 80, Nasdaq is at 82 and the VIX is down to 13.
New Ideas
Consider this my (now) weekly reminder that there is a base developing in the chart of LIT, an etf to be long Lithium.
Today’s Indicator
The 30 day moving average of the advance/decline line has barely budged in a month. If we had allowed it to get truly oversold I think this rally would be much higher by now. In any event I think the indicator lifts in the next few days.
Q&A/Reader’s Feedback
Petrobras PBR is certainly down and out and when asked to look I thought I might see what I am seeing in some of the European markets but all I see here is a big giant sideways. It looks like you play the range, buying near 13 and selling around 15.50.
CVS Health CVS is going to have to do more work before I can see it doing more than this wide trading range. And what’s more is this last push off 52 couldn’t even make it to the prior high at 63. If the stock comes back to 54 I’d like to look at it again and see if it looks good or shaky. If the former then it would be a good trade for early 2025.
Enphase Energy ENPH had an unfulfilled downside target around 55-ish. Was that November push down enough? I don’t know but if it comes back down and forms a W I’d be a buyer.
Caesars Entertainment CZR is a chart I can get behind as a name to bounce in early 2025. It’s down and out and it has been trying to build a base for six months now. I’d love to see it back in the 35-36 area but this stock has promise for early 2025.
Hershey HSY has an unfulfilled target in the low 160s so I would like to see it down there again. Alternatively a bit more sideways would tell me the stock is going to make another run at that mid 180s. I’d be looking to buy for a trade on any dips.
