Today's Action Was Like a Big Burp. What Comes Next?
The unwind continues, but today had a different type of feel. Plus, we look at BMY, GE, MSFT, SLV, C, CMG, EBAY, and LULU.
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The Market
Up until today the unwind we saw was mostly buying –or short covering—in the 493/others but not much selling in the Favored Few. That changed today.
First off, they almost all gapped down and did not recapture those gaps or even attempt to. That is a change. Another change is that for the first time since June 24th the net volume on Nasdaq was negative.
Stop and think of that. For fifteen trading days, net volume for Nasdaq was positive. I am not sure I have ever seen that. But I hope that helps you understand the pressure that built up when I talk about the unwind.
I figure we are getting close to the end of the major portion of the unwind, though. There should be more bouts of it, but, with yesterday being a Realization Day and today’s selling in the index movers, much of what was built up has eased. Think of it like feeding a baby; they get so full that no more will go down until you get a big burp. The burp is the easing of the pressure. I expect there will be more to unwind but without the violence of the last week.
We are still short-term overbought but not yet intermediate-term overbought. You can see below, the Volume Indicator sits (still) around 52%; overbought is mid to upper 50s. I still expect we will see an intermediate-term overbought condition near the end of the month.
Two days ago, I said I thought the SOX would break this line in the next month. I did not expect it to happen within 48 hours, but it has. You can see there is some support here (blue line). I wouldn’t be surprised if we see some more selling in the next few days and then a bounce but I am not changing my view on the SOX: I still think there is more to unwind here.
The Utes have rallied right back to resistance again today. Now they need to push through this 60 area. There is actually resistance even after this but without a push up they will not make it to a new 52 week high and a new high makes it a change.
New Ideas
The question is if Bristol Myers BMY a stock I have tried to bottom fish in often this year—with no success—is finally going to move. I hope so! As long as that 42 area holds the process should start. I would imagine resistance in that 45-46 will be a big problem the first time up.
I have been negative on GE Aerospace GE for months now and while the stock hasn’t rallied, it hasn’t gone down either. If this breaks it will measure to the 140-ish area. But it has to break first.
Today’s Indicator
The Volume Indicator is discussed above.
Q&A/Reader’s Feedback
Microsoft MSFT has support down in that 430 area. It’s a smidge short term oversold now but I would expect at some point in the next month it will come down and tag that 420-430 area.
I have had a positive bias on the iShares Silver Trust SLV but it keeps disappointing. For example, it did not make a higher high on this push up and is now threatening to break this uptrend line. I think it tries to rally again but I would prefer to see it do so before breaking 27.
I have a target on Citigroup C, one of the first banks I recommended coming off the lows in October, around 68-70 so it’s just about there. The stock has done nothing wrong but I would be inclined to take something off the table.
Chipotle CMG is coming into some support in this 52-55 area but at this point I think the best it can do is have an oversold bounce. There is a measured target (longer term) in the 47 area. I wouldn’t short the stock since it’s already down so much but it is way too soon to think about buying for more than an oversold bounce.
I have been eyeing eBay EBAY for weeks now and sadly have done nothing about it. I can only measure a target in the 56-58 area which is probably why I have hesitated. It’s a decent chart with a target a few points higher.
As a bottom fisher I am very drawn to Lululemon LULU for a trade. If it can get through 300 then I think it can pop to that line.
