Surprise! The Either/Or Market Is Back
Now that the 'others' have rallied at the expense of the index movers, and bulls have pulled in their horns, here's what I think could happen next. Plus a look at Dow-stock Nike and more.
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The Market
So they rallied what was down and sold off the index movers. One week ago I wondered if the Either/Or Market was back and lo and behold it is.
But the question is if we are about to see the inverse of the last two weeks. By that I mean, will we now see breadth improve while the indexes chop or go down? I think it’s possible considering we are still oversold but I would not look for a robust move as we saw in late April.
Mostly because I believe sentiment is not quite bearish. I do believe the bulls have pulled in their horns, though. We didn’t see it in the Investors Intelligence readings this week as they barely changed. Nor did we see it in the NAAIM Exposure as that barely changed. But the AAII bulls came down from 47% to 39%. The bears tread water. So that’s why I say the bulls came down but the bears did not rise.
Yet along with the better breadth we had some minor positive divergences with fewer stocks making new lows for the first time in weeks. I noted it a few days ago but Thursday it was stark.
The NYSE had 46 new lows compared to 86 new lows recently. The Nasdaq had 99 new lows compared to 164 recently.
I need more proof that the others can rally more than a short-term bounce before I believe the market is heading back up in a big way. As usual I think we get there because I can see sentiment getting bearish if the tech stocks come down. But we have to get there first.
New Ideas
I recommended Nike NKE here a few weeks ago and it hasn’t done anything but chop sideways since then. Thursday it crossed the downtrend line for the first time since February. If there is any follow through I think it can fill that gap.
Also, it is a DJIA stock and the DJIA is oversold having come down 2,000 points in such a short time.
Today’s Indicator
The 10-day moving average of the put/call ratio has turned up. It hasn’t meant much in the last few months but prior to that it has seen the market pull back.
Q&A/Reader’s Feedback
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Five Below FIVE has actually met its downside target from the top it broke down from using the black line. Using the blue line it hasn’t. But it is very oversold and I would think it ought to enjoy a rally into that $140-145 area. If I am correct — that it ought to rally — it would be a matter of how it gets there. One big caveat: The company reports earnings on June 5.
Wells Fargo WFC hasn’t done anything wrong. I think there is a possibility that it comes down to tag that uptrend line (currently around $56) but unless it gaps down under there, this looks like a normal correction.
Marriott International MAR is a chart I did not like earlier this year. When I look back at it I can see that it had one last rally in it after that and is now flirting with being flat on the year. However, unless it can recapture $240 in a hurry, the stock measures into the $200-205 area now.
