Is a 'Stabilizing' Market Singing Santa Baby or Santa Maybe?
Let's look under the sleigh at what's up, what's down, who's leading and who's following, sentiment and a comp from 2022. Plus, Bitcoin, a potential 'Dogs of the Dow' trade and more.
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NOTE: This is the last edition of Top Stocks until the calendar turns to 2025. The next edition will be Thursday, January 2nd. Wishing all who celebrate a Merry Christmas, Happy Hanukkah and a Happy New Year!
The Market
The action in bonds is not good. But let me point out that the stocks that have led the bond market are stabilizing for now: Utes, REITs, even the Homies shrugged off the bond move today. It’s only been a few days so I don’t want to fuss too loudly but it’s a change. Recall the Utes were the leaders, up and down. The DSI is 10 after tagging 9 on Thursday.
There is something else. A lot — not all — but a lot of the commodity stocks and value stocks were up slightly Monday. Those stocks have been in freefall for weeks now but in the last few days they too have stabilized, despite the inability of the indexes to rally well (small-cap, equal weight).
So while breadth only managed to get itself back to flat Monday (not great), upside volume on the NYSE came in at 57%. In the big picture 57% upside volume is not great when the S&P 500 is up 43 points but it is a better showing than breadth.
Finally, I want to update the chart of the Hi-Lo Indicator for you because it is now down to 0.28. As a reminder, under 0.20 and this gets oversold.
But what about sentiment? Well if we use the ISEE call/put sentiment then there are definitely no bears around. The Equity only portion is 3.14, which is the highest reading since spring of 2022 when we had a wild reading of over 9.0 (I’m still not certain that was a good number but they have not revised it nearly three years later so perhaps it was a good number). In spring of 2022 it was bearish.
On the Hi-Lo Chart I have noted where we were in the spring of 2022 when we got such a high reading. Not exactly the same as now in that we are currently heading into the oversold reading and then we were emerging from it.
But now look at the S&P from then. You can see the rally lasted another week or so and that was that. I still think we can enjoy a Santa Claus rally but sentiment tells me that I should continue to look for the first quarter to be tough.
If sentiment changes and folks become bearish and we’re oversold I’ll change my view but for now I’ll stick with the view I have had for a month now.
New Ideas
You might have noticed that the 493/breadth tends to do much better when China does better. I have. KraneShares CSI China Internet ETF KWEB has gone quiet again but hasn’t made a lower low since Thanksgiving. If it rallies maybe those 493 can have that Santa rally.
Today’s Indicator
The Hi-Lo Indicator is discussed above with the chart.
Q&A/Reader’s Feedback
Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.
My first reaction when asked about Bitcoin was to scoff and say something snarky. But it is a chart and people trade it so I’m taking a stab at it.
It’s trying to form a small top and a break of $90,000 completes it. The good news is the top is small and a break would measure down toward that uptrend line. Recall the DSI was knocking on 90 a few weeks ago and it is now near 70 so if it fell toward that line I don’t think the DSI would get extreme (i.e. low) but it surely would get closer to 50 or under which is neutral.
We looked at iShares U.S. Healthcare Providers ETF IHF a few weeks ago when the plunge first occurred and I had a lower target pegged, near $45-ish. However, a few of the components have met their targets and the chart is starting to stabilize. I suspect there is a bounce and another retreat as it attempts to find a bottom. But it could be an early 2025 type trade where folks are willing to take a stab at something new, that has been beaten up. The target would be $50-52.
Could Johnson & Johnson JNJ be finding some support down here? It certainly has found it here before. If you’re thinking in terms of Dogs of the Dow, this one would qualify so I’d say a stab for early January could work.
