The Semis Did What They Were Supposed To. While Bonds Did Not.
On a weak day in the market, the semis rally while the others dive.
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The Market
Finally, a day where the others went down, and the semis went up. This has been my premise since early August, and today might have been the first day (ok, maybe the second day) it worked. But can it last?
I think the semis are overbought now, too. I am not bearish on the SOX, just that they are in need of a pullback.
The thing that fascinated me today was that I expected a bit of panic over the bonds and we did not get it. Oh we got a little bit of concern, but so far that seems to be it. The DSI on the bonds is now 18.
Right now stocks have mostly ignored (well until today) the move in interest rates. My prediction is that when (if?) stocks stop ignoring the move in rates those folks who are so sanguine about interest rates will change their view in a hurry. And that would likely be around the same time the DSI gets near single digits on bonds.
Away from that the number of stocks making new lows on the NYSE increased yet again and are solidly over 100 issues (134). The same way I think more than 200 new lows on the Nasdaq is too high (currently 163) I think over 100 on the NYSE is too high (and bearish).
It was also the market’s worst breadth day since July 29th. And the largest point decline all month for the S&P. Let me note that the S&P closed on August 5th which was the third trading day of the month, at 7723 and today it stands at 7745. As I noted last week, once we got that initial surge off the low there has been a whole lot of nothing going on. Despite the hootin’ and hollerin’ about all the new highs.
Finally, the Dow is now down about 1000 points from that trendline I drew in just over a week ago. There is a gap to fill around 53175. If it gets into that area I suspect we see a small bounce.
While the line is not as good (in terms of touches) the RSP has a similar upper trend line)
New Ideas
I want to follow up on Boeing (BA), which I was asked about in mid July (blue arrow) and then again after it spurted higher in early August. I did not like the chart in that 205 area because it was making a lower low and hadn’t filled that gap at 200. After it pushed up over the downtrend line, I thought, okay, I was wrong, now a pullback to the 232 area ought to hold and be buyable.
I was wrong on both scores. The stock has barely had an attempt to hold 230-232 and today it sliced under the line with no problems. Put me on the sidelines here.
Today’s Indicator
The 30 day moving average of the advance/decline line is not oversold.
Q&A/Reader’s Feedback
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While I still favor GLD, it does have some resistance not far overhead (415-ish), and many of the stocks are no different. Agnico Eagle (AEM) runs into some trouble in the 195 area. I’d love to see a pullback into the 170-175 area to ease some of the overbought-ness and give us another buying opportunity.
It’s possible Newmont Mining (NEM) breaks out now, but I am inclined to think it could use a pullback first. I would buy a dip to the 110-112 area, but I remain a fan of gold and gold stocks in general.
I have a hard time jumping into the inverse (bear) ETFs but since I have been carrying on about the banks for weeks now (to no avail) I suppose it would be poor form if I didn’t say I think FAZ can rally to resistance (33-ish). Just remember these tend to be trading vehicles; do not fall in love with them.
I still think Merck (MRK) is okay since it hasn’t done anything wrong yet. But there is a measured target in the 135-138 area, so I wouldn’t chase it here. A pull back toward 130 would be okay and in keeping with the higher lows.
I have tried to bottom fish Pepsi (PEP) several times, and as soon as it pops, there is no follow-through. What would change my mind would be if it can get over that downtrend line because that would signal a change in the pattern (a downtrend since February).
