Extremely Greedy, but Not Yet Overbought
Fear & Greed gets extreme, along with some sentiment indicators. But we're not yet at the point where stocks are overbought. Maybe we'll get there this week. Plus, IWM, TLT, ANF, GAP, GNRC, GOOGL, MBLY, and CTRA.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Market
Let’s talk about sentiment because the CNN Fear and Greed Index is back into Extreme Greed, just ‘this’ side of it. So sure there is room to move a bit more.
But we now have the DSI for the S&P at 84. Nasdaq is a bit of a laggard with its reading at 81. And the VIX is at 13. Let me remind you my view on this indicator. A reading over 85 is a flashing yellow light. A reading under 15 is a flashing yellow light. Over 90, and it’s actionable. Single digits, and it’s actionable.
Now, let me show you the chart of the 21-day moving average of the ISE call/put ratio. It has been climbing. It is not far from the prior peak which arrived in mid-July, just as the market was heading into a swoon.
Now let’s move away from sentiment for a minute and talk about the Overbought/Oversold Oscillator that I use. It is not based on price but on breadth. That’s why it is still down there under the zero line. I expect this to push upward this week. By Friday, this will be back to an overbought reading. If we do keep rallying that would mean we’re overbought with a high DSI reading.
Last week, I said I thought IWM could rally and it has, thereby helping sentiment ease its way to this bullishness. But imagine for a minute how excited everyone would be if the Transports broke out. Hootin’ and hollerin’ would surely be extreme. My bet in the Transports is still CSX but CSX doesn’t move the index. FDX and JBHT do.
Finally, the bond market was closed today but TLT gapped down and managed to close green. I remain hopeful, especially since the DSI is now 28 on bonds.
New Ideas
I have had a lot of questions on when to buy some of the Chinese stocks back. Let’s look at KWEB. First of all, I am not a fan of buying stocks like this. I was fine, thrilled to buy in mid September when it was down and out and basing. Up here, I feel like it’s not a great risk/reward.
There is some support back at 32-ish but I like a pattern to set up. I like to see it stop going down and go sideways for a while, give us something to trade against. I just don’t see that on this chart. It could just as easily plop back to fill that gap at 30 as it could rally to fill the gap at 38. I’d rather buy TLT (!!).
Today’s Indicator
The 30-day moving average of the advance/decline line is going to be overbought again at the end of this week.
Q&A/Reader’s Feedback
I have been wondering if the Gap could be bottoming, but the resistance is all the way up, so I’ve shied away from it (in favor of ANF in the retail area recently). GAP would have to get over that downtrend line (22-ish) then come back and test the line and basically that feels as if it might take months to chew through that resistance. I will call it improving.
As a follow-up on Abercrombie & Fitch ANF, it is just about filling that gap at 160 that I had eyed, so it should run into some resistance soon.
Generac GNRC hasn’t done anything wrong and it has a measured target in the 180-185 area. I just feel as though it tends to be a ‘disaster’ play, so if (hopefully) the news of hurricanes is behind us, the stock may not have that much left in it.
When I recommended Alphabet GOOGL two months ago around 160, and it bounced so quickly I thought I was smart. Then it collapsed to 150. Now it is trying to form a small bottom. If it can’t get over 170 in the next week or two I would have to give up on it. If it can, then my next target is around 180.
Mobileye MBLY doesn’t have enough of a base for me to like it, but it looks as though much of the tax loss selling is done. I think it can get to 14-15, but that’s all I look for now.
Coterra Energy CTRA looks like a rally to 26 is where I would sell it and a pullback toward 23 is probably buyable so at 24.50 it’s caught in the middle right now. It’s not done enough work to overcome that top it broke down from.
