Market Chops Away and Investors Get Anxious
Signs of nervousness are starting to appear amid the choppy trading action. Here's where and why. Let's also dig up a plan for copper, Deere, RH and more.
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The Market
My gosh another day of chop. Can we take any more?!
Sadly I expect there will be more. Thus far the reaction to earnings has been much more muted than in past quarters. Oh sure, we’ve had the random United Parcel Service UPS collapse or the Sherwin-Williams SHW pop but mostly the reactions have been grinding.
I do believe folks are getting a bit anxious though. The put/call ratio jumped to 0.96. This is the highest reading since June 6. Recall that Monday the ISE equity call/put ratio had the lowest reading since just prior to that (May 24). So we got the euphoric readings in sentiment last week and with a lack of follow through folks are getting anxious.
Another reason they are likely getting anxious: Next week is the Fed meeting. And another: Tuesday the Russell 2000 rallied 1% but net volume on both the Nasdaq and the NYSE was flat to slightly down. I’ll call that a lack of conviction.
However, let me note how unusual it is for net volume and/or breadth to be so flat when the Russell is up 1%. Since I think we are setting up for a rocky August I think it means this is the period of time where folks start noticing that their stocks are chopping about and not doing much thus they are undecided if they should commit more money to the market.
The only indicator that changed slightly is the Nasdaq McClellan Summation Index, where I use volume. It has turned down. It needs a net differential of +2.5 billion shares (up minus down volume) to halt the decline.
Down below you will see that the McClellan Summation Index for the NYSE is still ticking upward. That one requires a net differential of -900 advancers minus decliners on the NYSE to halt its rise. A week ago that number was -3,100.
New Ideas
I was asked if I thought copper could rally the Global X Copper Miners ETF COPX could rally. Recall I thought it could have one more rally a week ago when it was at $47 and it has collapsed since then. If it gets to that $40 area it ought to bounce just from an extreme ovesroldness. The DSI is at 21 so if it can get near $40 the DSI would probably not be single digits but would be close to it.
Today’s Indicator
The McClellan Summation Index is discussed in full above.
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Forgetting the short-term movements of Deere DE take note that the S&P 500 is up a hefty amount in the last year and this stock has literally gone nowhere. The big picture would say we must respect whichever way it breaks out. In the near term my guess is there is still one more rally left in the stock before we get intermediate-term overbought but I’m just not sure it’s going anywhere special. For example, if DE holds yesterday’s low and rallies, maybe it only makes it to $380 before heading south again and ends up just in a sideways chop.
RH RH is another stock like Deere: It has gone nowhere in an entire year. Despite all the pops and drops. Right now I’d say in the short term if it fills that gap around $240-245 it should rally again but in the big picture, it’s a giant sideways.
Kellanova K needs to hold $55, which is last week’s low and where the uptrend line is, to be okay. So on a risk/reward basis, it’s not bad because you know where you are dead wrong.
