It's Hard to Gain Upward Momentum in an Overbought Market
Breadth remains positive but until something changes, it'll be hard to make much of a move higher. Perhaps a bout of volatility will help shake things up. We'll also look at KWEB, COIN, AVGO, MARA, and PYPL.
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Today’s market was all about China (finally!) and Nvidia. But breadth remains positive even though the S&P has done nothing but chop since Thursday.
At least stocks making new lows stopped expanding, not a lot, but enough. Nasdaq’s new lows contracted to 109 from 131 yesterday. New highs, though, are still over 100 away from last week’s peak reading for Nasdaq.
The NYSE’s new highs are over 150 from last week’s peak reading. That is the overbought condition at work. Keep in mind that the Russell is down 1.5% since Thursday.
But what I want to discuss is the Utes. I know I turned sour on them (after being quite bullish again in early July) when they got to 1040, but they didn’t care about my sour view; up they went. Today, they were down after trying once again to get through 1060. That uptrend line is important now. Actually, I’m going to use 1030 as a level to watch because that would take out all those early September lows.
As for the KraneShares CSI China Internet ETF KWEB which, all of a sudden, everyone is quite excited over (what can it be?!), we did well but let’s take a look at the long-term chart. This chart encompasses three years and is weekly. My guess is that 31-32 area is going to be some resistance the first time up and my rule of thumb is when the market gives you a gift like this you take a few profits and ride the remainder.
I do think it will eventually cross that line, but I am a terrible chaser. I would wait to see if it crosses the line and then I would buy a pullback to the line.
And the market as a whole? I’m still looking for a rise in volatility this week. Finally, the DSI for Gold is 88 since I am certain there are those who are curious.
New Ideas
I don’t know why Coinbase COIN didn’t enjoy a bounce today but I’m inclined to think it wants to cross that line. I thought it tended to bounce with China; same was WYNN and LVS, two other names we’ve looked at positively in recent weeks.
Today’s Indicator
The McClellan Summation Index is still rising. It needs a net differential of -900 (advancers minus decliners on the NYSE) to halt the rise. We began the week with that number at -1000 so once again that is the overboughtness at work, it’s hard to gain momentum.
Q&A/Reader’s Feedback
As someone who tends to prefer stocks that are down and out Broadcom AVGO is not my cup of tea up here. I did like it a few weeks ago but now it has resistance up here so it’s hard for me to get on board. I would like it back around 165 (blue line).
(Just a reminder in the semi space, I am still waiting for LRCX to get to 800-825; it keeps stalling just shy of 800)
PayPal PYPL has a measured target at 80 and another at 85. But the stock has just run ten bucks in a straight line and that would mean chasing, something I am terrible at. A pullback around 74 should be buyable.
Marathon Digital MARA should rally to 18-19, but there is so much resistance overhead all the way up that I sense it will need more work before it can really chew through that. For now, I like it for a trade.
