Stocks Moving Together Is Healthier, Even if They're Falling
That makes two down days in a row for the S&P and Nasdaq in July. Let's look at the charts to see what comes next. Plus, QQQ, MSFT, VZ, ABT, GOOGL.
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The Market
At least we got out of that routine of the Either/Or Market. Instead everything came down together. Despite being down, stocks moving (mostly) together is healthier than not.
In any event, these were the first consecutive decline days for the S&P and Nasdaq in the month of July. But more so, yesterday we discussed the net volume on Nasdaq and how it was negative for the first time in fifteen trading days. Now we have a second day. To put that in perspective, we have not had consecutive negative volume days on Nasdaq since the April decline.
I don’t know if tomorrow will be up (I’d guess there will be a rally attempt on Friday), but I call that a change in pattern, when something that persistent changes. I think that means even if we bounce from here on, in the tech names, there is still more to come for a correction.
Notice how the QQQs are right at an uptrend line. There is also that mid-June low at 475. So yes, I think we see a little bounce from here. But based on the fact that I see an intermediate-term overbought condition in late July I suspect we will see downside in this area again come August at the latest.
New Ideas
Here’s another example of a stock that looks short term oversold: Microsoft MSFT. I still think it bounces and comes back down but it’s at support and oversold.
Today’s Indicator
The ten-day moving average of the put/call ratio is finally at the same level it was last summer. It tells us sentiment is complacent.
Q&A/Reader’s Feedback
Verizon VZ has a decent chart but with the market overbought it’s hard to get excited over it. As long as it stays over 41 it ought to make it to the 45-ish area.
Abbott Labs ABT is hanging by a thread. I would be in favor of watching it to see if it can hold over the next several days. If it can hold then I would think it is oversold enough to rally.
The question is when do we buy Alphabet GOOGL again and the answer is that it should bounce off that line (172ish but rising). Yet, I am more inclined to wait for the set up. The way it went sideways from mid May to mid June provided such a set up for that last run up. To me that seems like the path forward: waiting for the set up.
