Is Alphabet Stock, Like the Market, Oversold Enough to Rally?
Not much changed on Friday. The market is oversold, while sentiment is complacent. We could rally, and a stock I recently recommended could follow.
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The Market
I want to tell you something different about the market today, but I cannot. We remain oversold, and sentiment remains complacent. Friday’s action did not change that.
The one thing that has shifted over the last week, though, is that some of the intermediate-term indicators have pushed closer to an oversold condition. Last week, we looked at the Volume Indicator that now sits at 49%. That is quite close to an oversold condition. I prefer when it gets to 47% or under, but 49% is the top of an oversold range. You can see on the chart that when it gets to 47%, the rally tends to have real legs. At 49%, the rallies tend to be more like what we saw in early August, enough to get folks excited, but never really make much progress.
The Hi-Lo Indicator for the NYSE is now at .25. This is the lowest since the Tariff Tantrum in the spring of 2025. That tells us a few things. First, it tells us how much selling there has been in the others. There is more selling now than there was in the spring (see the lower low). There is even more selling than there was heading into that Thanksgiving low of almost a year ago.
So in that respect, it shows an awful lot of weakness under the hood, despite the S&P sitting at 7600. But it also shows how oversold the market is becoming. The NYSE chart is here; it gets fully oversold under .15. Nasdaq’s is below. Nasdaq’s sits at .27.
It is possible that we have a rally early this week and come down again, and that next trip down is the one that changes sentiment. In fact, that would probably be a better setup.
I want to reiterate that the DSI for bonds got to single digits (9) on Thursday, and Oil got to 91 last week. Single digits and over 90 readings are not common, and while they may not give an immediate change, I have rarely seen them not work.
New Ideas
I was asked to follow up on Alphabet (GOOGL), a chart I recommended a few weeks ago. It is the same price now as it was then. I still think it is oversold enough to rally. If it can cross over that 345-350 area then it improves even more. I am inclined to think under that 328 area and a visit back to the July lows is what I would look for. But that would then run right into support from the prior low (spike lows tend to hold in the first trip down) and the uptrend line.
Today’s Indicator
As noted in the discussion above about the NYSE’s Hi-Lo Indicator, it is getting oversold. Unlike the NYSE Nasdaq’s did get fully oversold this past spring. But for those who think the NYSE’s is all ‘interest rate related,’ Nasdaq’s says it isn’t. It gets fully oversold under .19.
Q&A/Reader’s Feedback
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Amgen (AMGN) had a big gap down and has shown no sign of rallying, even after three days. However, it is short-term oversold. It ought to bounce. In fact, I think it bounces and comes back down to tag that support zone in the 350-360 area. My experience with AMGN is that it sets up a nice pattern for when it is time to buy. I recommended it back in May/June for that very reason. I expect in a few months’ time, we will once again see a better setup.
Northrop Grumman (NOC) has me very intrigued. That action in July, which left a sort of island down there, ought to be bullish (hasn’t been so far). But the stock is at support and looks oversold to me. My guess is I’m early, which means a bounce and back down, but I like this chart; I just don’t know where I would put a stop.
General Mills (GIS) has some decent support in the 35-36 area, but the way it failed at resistance and came down so suddenly is not bullish. It’s short-term oversold (as are so many stocks), but I’d wait to see if it can hold 35 and then gradually improve.
Kraft Heinz (KHC) has been milling around this 24-25 area for six weeks now. I’d say as long as it stays over 24-ish, it’s probably okay to nibble.
ConAgra (CAG) is coming into support and is oversold. I always prefer to see a setup rather than just take a stab because it is oversold and at support. That often works much better with big-cap tech stocks than it does with, say, staples. And that move to 16.50 did meet a measured target. My guess is bounce and back down.
