Is Four Days Too Soon to Ask, Are We There Yet?
Familiar words to every road-tripping parent. Let's take a look and see if the market is oversold enough yet. And then, we'll check out PFE, CVX, SUI, HR, and W.
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The Market
Aren’t we oversold yet? That’s the question that litters my inbox. Big-cap tech is a bit oversold, same as it was a week ago. But in the last ten trading days, breadth on the NYSE has been red a mere four trading days. That’s it.
I know it must feel like we’ve been heading down forever, but the S&P has been down four straight days. Nasdaq was green Thursday, and the DJIA only had its first consecutive red days on Thursday and Friday last week.
That means my own Oscillator still resides above the zero line. It is not oversold in the manner you think it should be. Nasdaq is in a better spot to be oversold.
Then, there is the Nasdaq Momentum Indicator. This is based on price, not breadth. What I do here is plug in lower closes for Nasdaq over the next week or so to determine when the indicator stops going down and heads up yet price keeps falling because that is the definition of oversold.
Please keep in mind the exact day is not what’s important because it can be plus or minus a few days, but we’re looking to capture the general time frame. I have walked Nasdaq down approximately 1500 points, and the day the indicator turns up while price keeps falling is Friday, September 13th
It is hard for me to imagine that the market will be down every day this coming week after last week, but I would say if you’re looking for an oversold rally that sticks, midweek has a decent chance.
The only other change in the indicators is that the put/call ratio finally pushed up over 1.0 on Friday as we saw it climb to 1.12. I suppose I can add in that my Saturday Twitter Poll (where folks tend to be more right than wrong) had folks voting that the next 100 points for the S&P would be down for the first time in eight weeks. Contrarian? Unsure because, as I noted, they tend to get it right.
One final note is that I have been harping about the move in the currencies and the US Dollar specifically for about a month now. Friday bonds broke (yields were lower), the Utes were solidly red (I still don’t like the Utes up here), and the buck, given the chance to break, held instead. I think the Dollar rallies this week, but we should note that the bonds were the outlier on Friday.
New Ideas
If you’re looking to trade for an oversold rally, then I would still look at the QQQs or something in the semi space. LRCX still has not made a lower low (vs that spike low). That’s where we should get an oversold bounce from for a trade.
But I am still drawn to the chart of Pfizer PFE as a stock trying to make a bottom. If it can ever get up and over that 29.25 area, it would be good.
Today’s Indicator
Nasdaq’s Hi-Lo Indicator remains in overbought territory at .59.
Q&A/Reader’s Feedback
Chevron CVX broke down to a new (one-year) low Friday, which is not a good sign. The stock is down eight percent in a straight line and fifteen percent in a month, so it ought to be entitled to an oversold bounce. If it can get back to 142-145, I’d be a seller. The only thing that would change my mind is if it gaps up over 142.
Sun Communities SUI has been terrific, as have most REITS, and this one measures into the mid-150s after the recent breakout. The only hesitation I have is that it now yields under three-percent and the reason they have been so good is that they offer a decent yield which if this one rallies much more it will not.
Healthcare Realty Trust HR is another REIT that broke out a while ago. It measures to around 20-ish and has a bigger yield than SUI. I would caution that the chart has made very little progress in the last two months, so if it gets back under 17.50, that spike high from last week is going to loom large as resistance.
I was asked to follow up on Wayfair W which broke in early August. Quite frankly, I am surprised it hasn’t cracked 40 yet. I would sell a rally to 50, if it can get there.
