Mega-Caps to the Rescue
If not for the mega-caps, the market might be down. Let's look at volume and breadth indicators and then answer your questions.
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The Market
Thank goodness for those mega-cap tech stocks, or the S&P might be down. But you know what? Despite the fact that folks started to feel sort of glum yesterday it will come as no surprise that they are not nearly as glum after today’s action.
Yet 48% of the volume was on the upside on the NYSE today. It couldn’t even get to 50%. And take a look at the Volume Indicator down below. It has been sitting either side of 50% for six weeks now. I am not sure I have ever seen that. Surely not while the S&P is surging.
Breadth today was a mere +180 so if you’re wondering why so many of your stocks were red today—unless you only own the index movers—then that is why. No one seems to want any of the others.
The Utes were red. The Transports were red. The Banks were red. The Industrials (XLI) was red. Yet none of them really made new lows, they just seem to lift their heads and get sold every time they do that in December.
Just take a look at the number of stocks making new highs. It contracts daily now.
Now, if the chart of new lows looked like the chart of new highs, that would be bullish (and vice versa). But instead, the new lows rise (on an up day). The best news is that they haven’t (yet) exceeded last week’s readings, although Nasdaq is close.
The poor breadth readings ought to lead to an oversold condition next week. Maybe that’s when we get some rotation back into the others so that we get that Santa Claus Rally.
Yes, that is still my view that we should get another rally in late December but then I expect a peak in the first part of the year.
New Ideas
Down below you will see I was asked about FCX and TECK and I am warming up to them. It forced me to look at Southern Copper SCCO. That seems to be improving too. If the US Dollar can back off (see last night’s note on that) then maybe these stocks can have that Santa Rally.
Over the last few weeks I have been asked about several energy stocks and mostly I have been non-plussed by them. Yet one of my favorite ways to look at the energy area is the ratio of OIH to XLE. It’s because OIH is the higher beta so if folks are buying that there is interest in the group that is developing. Notice that the ratio has been making higher lows since the November dip.
Perhaps energy too gets a Santa Rally.
Today’s Indicator
The Volume Indicator is discussed above.
Q&A/Reader’s Feedback
Teck Resources TECK has been a terrible stock since the spring (there we go again with stocks that peaked in the spring). But has it done enough work to rally now? I would say if it can hold on to 44-ish (giving it a little leeway) into year end then the risk/reward for an early 2025 rally –or even Christmas week—is decent. Risk a buck and change for a rally of at least 4-5 bucks.
Freeport McMoRan FCX has a similar chart to Teck. It too peaked in the spring and is back to where it started the year. I’d love to see it plunge to that lower line and rebound from there. But if the buck weakens (see last night’s missive on the buck) then FCX might get a lift. Of course for both you probably need China to get going.
Palantir PLTR is in a world of its own. I liked it back last summer in the 20s but I never thought it would quadruple. It hasn’t really done anything wrong. Does it need a correction? Yes but that’s the worst I can say. If it rallies and can’t get over that spike high at 80 I would begin to fret as we head into 2025.
Robinhood HOOD has the feeling of a very over-extended stock that needs a correction. If it rallies and can’t get over 42.50 you should worry that the correction will be steep (30-ish).
Diageo DEO has already had a nice rally off the low so in this market I am not chasing it. I would say it is in a range between 117-133 so at 126 we’re almost in the middle of the range, neither here nor there. Dips will probably lead to another rally for now.
I tend not to like retailers at this time of the year because I find the majority of them tend to peak in the weeks between Thanksgiving and Christmas. Not all, but many/most. Abercrombie & Fitch ANF is no exception as we can see the rally from 130 to 160 stopped just after Thanksgiving. There is support at 130 so it probably bounces from there but notice the highs have been lower highs since June.
I am intrigued by IHF, an etf to be long Healthcare Providers, if only because each low in the last year has stopped at that line and has come on a spike. So I would play for a bounce knowing if it cracks under 50 I am wrong.
