The Mags are Ugly on a Day With Good Breadth
Why was the market down on a day that breadth was positive? It’s that either/or market again.
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The Market
I get it. If you own semis or any of the Mags, it’s been a really ugly week. But if you own the others, you’re probably enjoying this market for the first time in ages.
The S&P lost nearly 100 points and breadth was positive. Not just that, 52% of the volume was on the upside. What’s more, the Russell has clocked in four straight green days. That is the most it has seen since mid-August.
Then there is Nasdaq. I won’t sugar coat it, it’s not pretty. But it’s not pretty in the index movers. But you know how much upside volume we saw on Nasdaq today? 43%. That’s nothing because it means downside volume was just over 50%.
QQQs saw volume jump to 60 million shares. That is the second 60 million share day in a week. SMH volume rose but there is nothing to write home about there.
We also did not see a significant increase in Nasdaq stocks making new lows; there are still fewer than there were on October 14th.
While we’re talking about new lows, let me note that the number of stocks making new highs on the NYSE was 110. That’s not much, or is it? It’s the highest reading we have seen since early August. That is what happens when markets broaden out.
Sentiment wise, I wish I had great news for you. While folks are unhappy with their tech stocks (which I really thought would rally more than they did earlier this week; I was wrong), they are not panicking. The put/call ratio was .94 today, so there is a little bit of fear. But the AAII folks are still pretty sanguine, and the NAAIM folks who took their exposure down to 74 last week scooted right back in with 87 this week.
Folks will clearly not turn bearish as long as we have an Either/Or Market because unless/until everything goes down together, there are hidey holes. I continue to prefer the others over the big cap tech stocks but even the others are getting a bit overbought up here.
New Ideas
First a few follow ups.
I recommended Visa (V) in June because I thought it had a head and shoulders bottom. I have two measured targets: 414 and 434. It closed at 414 today and it has been green for fourteen of fifteen days. I’m in favor of taking a little something off the table and hanging on to the rest until the stock does something wrong.
Proctor and Gamble (PG), I recommended in September due to that big base. The initial target was that old high from February. Just because it gapped up to the old high, I would take a little off, but the fact that no one seems to like it has me holding onto some just to see if it can digest the recent move and then rally again.
Then there is Google (GOOGL) which I had liked from that July low, but the action recently has me exiting the stock. Sure, it has some support around 320 and it’s getting oversold, but I don’t like that it made a lower high in September (vs August) and now made a lower low (vs September). I think it should bounce from 320, but, lately, that has been the wrong call to expect a bounce from support.
Finally, I want to make a comment about the stocks that are rallying. It really does seem as though software is hot again. But Microsoft (MSFT) did not rally today (yet Adobe, a recommendation of mine from last week, had a great day). Technically MSFT hasn’t done anything wrong, but I’m taking some profits. If it breaks under 500, I will exit the rest.
My guess is there is a lot of re-positioning going on as shorts get covered and longs get sold but I will stick to the charts.
Today’s Indicator
The ten-day moving average of the put/call ratio sits at .87
Q&A/Reader’s Feedback
Lam Research (LRCX) not only gapped down under the July low, it gapped down under the twin lows from April. It has now left a big top overhead. In fact, it looks like a giant island. Yet it is quite oversold. Unless we get a massive change in sentiment, I would be a seller on a rally back near 260.
Applied Materials (AMAT) broke the July and the September lows so now I would expect a rally to 400-ish to be a problem area. If we can get an actual change in sentiment, then I think it can rally into that 440-450 area.
I look at the chart of Sarepta Therapeutics (SRPT) and see a giant base. But then my head asks why this healthcare stock hasn’t rallied when almost every other healthcare/drug stock has. I would say as long as you have some patience and the stock doesn’t break under 15 (a long way away), then I’d give it a chance to rally.
For the longest time I have said when it comes to NVIDIA (NVDA), the stock tends to go sideways for months on end, threatens to break down and then gets saved. For now, that is still my view. With that in mind, can NVDA come down to that 190 support? Sure. Until the stock breaks under that 190 area, I’ll stick with the sideways view. For such a big stock it has never seemed to be a great trading stock to me.
I didn’t like Strategy (MSTR) when we looked at it a week or so ago, and I’m still not a big fan except that it has come down to support. I’ll call it trapped between 120 and 180. There is a chance it is forming a head and shoulders bottom, but for now it appears to be a chop-fest.
I actually recommended IBM (IBM) in late July when it seemed to be forming a small bottom. I thought it might even fill that gap (to 285). That might have been too aggressive on my part. For now, I will say I’ll give it the benefit of the doubt as long as it stays over 240. I’d want to see it cross that downtrend line soon though.
