Mid Caps Approach Concerning Reversal and I'm Treading Carefully
We are days away from an intermediate term overbought condition, so I’ll tread carefully.
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The Market
We get a down day in the semis and it’s barely noticeable. I mean, look at Qualcomm (QCOM) , which decided to go parabolic on Thursday.
I know everyone watches the small caps and they use (IWM) (I do it!), but I keep my eye on the mid caps and long-time readers will know I do not like to fuss over outside reversal days. But if this one can’t hold over 670, I’d get concerned. You see holding 670 would simply be a gap fill but breaking much under there would signal a reversal.
I’d love to tell you there was massive selling on Thursday but there wasn’t. The banks still act awful but, while on Wednesday Citigroup (C) was red, on Thursday it was green. On Wednesday, JPMorgan (JPM) was green, on Thursday it was red. And I had not even realized that Wells Fargo (WFC) left an island overhead a few weeks ago and each day gets closer to the lows.
The AAII folks did not get more bullish, they simply got less bearish, so we are back to more bulls than bears but nothing extreme. The NAAIM folks, however, increased their exposure up to 97, which is the highest since January. Over 100 and they are on margin. This is knocking on the door of giddy, too.
The other chart I want to highlight is the Utes. (XLU) is closing in on that long-term uptrend line. It hasn’t made a lower low yet but it’s close. I think it gets oversold down in that 44 area but I would love to see some hysteria over it before I commit to anything because it really is starting to look toppy.
On Friday, we’ll get the jobs report so it’s a coin toss to me. But we are days away from an intermediate-term overbought condition so I’ll tread carefully now.
New Ideas
I want to follow up on Oracle (ORCL) which I was asked about earlier in the week. I had an initial target in the 200 area with a shot at closing that gap at 220. It stopped at 200 on Thursday so now you would like to see it stay over that 185-ish area on any pullback.
And for the person who asked about (UNG) , the DSI did get down to 25 this week so now I’d be focused on it getting over 11 with the next resistance just shy of 11.50.
Today’s Indicator
A few weeks ago, when the ISE Equity call/put ratio’s 21 DMA was flirting with 1.10, I said I thought it would bounce off there and it has. I then said I thought it would march up into that 1.50 area which it is currently doing. I expect within the next week we will see it peak in that area. Then we’ll see if it can roll over.
Q&A/Reader’s Feedback
The chart for (IHI) , an ETF to be long medical devices, looks oh-so similar to Abbott Labs (ABT) .
ABT, like IHI, is in a downtrend, and it is the second-largest component in the ETF. It is oversold, no doubt. But that’s the best I can say about it. If you want to bottom fish it then it is going to need to get itself up and over 52 because there is a gap there and resistance. The most bullish thing it can do would be to gap up over 52. Otherwise it looks like just another oversold rally.
That is a long base in the chart of Sirius XM (SIRI) . The base measures to 29 which is where it got to recently. However, as the great Louise Yamada always says, the longer the base, the higher in space. So I would be willing to let it digest the recent move and take another look at it in a few weeks. A pullback to tag the line at 24 would be even better.
Spotify (SPOT) looks like a number of other charts in my pile: gapped down to the recent low. That makes the risk/reward decent because you know where you are wrong. If the market was intermediate term oversold I’d love to take a stab but it is not so my enthusiasm is a bit more tepid. Resistance at 480 to 490 seems tough right now.
Netflix (NFLX) has just about filled the gap at 86 but if it can’t get itself up and over 90 in a hurry I would not want to be long it. Again, if the market was heading into an oversold condition, then bottom fishing in stuff that is down so much is a terrific idea. In a market that is getting intermediate-term overbought, we could see a lot of languishing and perhaps more selling. So, oversold enough to bounce but a failure to get over 90 and I’d fret.
I am not much of an F1 person, but gosh, I am drawn to head-and-shoulders bottoms and this feels like it is shaping up as one. Or could be. A stop seems far away under 310.
Teledoc Health (TDOC) had a terrific reversal last week but it has a lot of resistance to chew through so I don’t expect it to be easy. There should be many stops and starts but I think it can make its way toward 8-ish.
I would like American Water Works (AWK) to prove to me that the turnaround on Thursday is real. So, this is on my radar to see if there is follow through. A lack of follow through would have me sidelined. Follow through would have me getting much more interested in bottom fishing it.
