Others Can Debate Fed Actions. Let's Talk Stocks.
It's Fed week, which means talk will turn to rates and whether the Fed did too much or not enough. What really matters is what the market is doing. Plus COST, MP, ENVX, CRWD, AVGO, and BIIB.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Market
For the next day and a half, we will have to listen to the debate if the Fed is going to cut 25 bps or 50 bps. And then, if that isn’t enough, we’ll have to listen to whether or not said rate cut is enough or too much!
Since we know I am not very good at all these narratives I will point out that the S&P is now at six straight green days. You know how it is with these streaks, the longer they go on without a break, the worse it is at the end.
That said, my notes continue to say that we should get short-term overbought again mid to late this week. For example, the McClellan Summation Index is currently heading up. It would need a net differential of -2100 advancers minus decliners on the NYSE to halt the rise (this is a good cushion to have). If we are up with decent breadth for a few more days, that number is going to shoot right over -4000, and that is an overbought condition.
My own Oscillator ought to shoot up again tomorrow toward that upper range.
The VIX was up today (with a green S&P), so the DSI lifted back to 23. But I will continue to watch if the VIX has higher lows with new highs in the S&P heading into that overbought condition. I think it is likely that will be the case, and therefore, I will look for a bout of volatility heading into the end of the quarter (next week).
But the number of stocks making new highs on the NYSE pushed to 415 which is a positive. I know it looks as if this is the number that sees the market peak but the reality is that we have tended to get a peak reading in new highs that has no increase the next day. And that is what makes it a negative divergence. It’s easier to see at the April high on the left side of the chart.
There was one other change today: the put/call ratio fell to .81, the lowest reading since September 3rd.
New Ideas
Costco COST had been terrific (and continues to be) but it could use a correction back to 870-880.
MP Materials MP has been a terrible stock all year but take a look at the action in the stock over the first half of September. It had that spike up and then corrected for two weeks, digesting the move. I’d like to see more of that. I think this stock gets stopped at 15.50-ish.
Today’s Indicator
The 30-day moving average of the advance/decline line will be fully overbought on Wednesday.
Q&A/Reader’s Feedback
Enovix ENVX should run into resistance between 10 and 11. In fact it has resistance all the way up to 12. However, it came very close to filling the gap at 7 in the early September decline (positive). I think the stock has a long way to go to eat through all that resistance overhead but if can stay over 9 it ought to start building a base. Under 9 and the downtrend that has been in place since July ought to continue.
It is my view that Crowdstrike CRWD will run into resistance in the 280-300 area and if I was long I would be taking profits there. If I am wrong then it will go on to fill that gat at 340 but I suspect the first trip up the 280-300 zone is where it stalls.
I think Broadcom AVGO has run quite far in a week and needs a consolidation or pull back so that resistance in the 170-175 area should stall it out on the first trip up there. I want to clarify that I don’t view the chart as bearish though, just one that is so close to resistance and has run quite far. I would like to see how it sets up into a pullback so please nudge me again if we get a pullback in late September.
Biogen BIIB finally filled that gap from April. The chart is still not a good one (and is another chart that will be vulnerable to tax loss selling in the fourth quarter) but it’s now possible it can start the process of building a base and improving.
