Monday’s Statistics Looked Terrible, Although There Weren’t Many Sellers
It’s one of those days where things looked bad, but the up and down volume statistics were equal.
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The Market
The statistics from Monday’s action were not very good. In fact, they were terrible. Yet as you go through the individual stock charts, you don’t see much selling.
For example, net breadth was -800. Not great, but take a look at the Overbought/Oversold Oscillator: it ticked up (squint, you can see it). That’s because, as I noted, we came into this week a little bit oversold. So for the Oscillator to fall more, breadth would have had to be worse than it was two weeks ago. And it wasn’t.
Or let’s talk about Nasdaq, where the number of stocks making new lows zipped right back up over 200. Typically, when we get more than 200 stocks making new lows on Nasdaq I think it’s bearish. But it turns out up volume on Nasdaq was 50%. Which means down volume was 50%. Buying in the semis offset the selling elsewhere, thus my comment, we don’t see much selling.
If we look at the IWM and the MDY, they both broke uptrend lines. Those charts look terrible. But the only charts that really look like they had a ton of selling were the hospitality names, and in that I include cruise lines and airlines.
Even when we look at IWM, we see the break of the line, but there is no lower low (than late July). Not yet.
MDY is the same. It closed up less than a point from where it closed in July, but there is no lower low (breaking 680 would be a lower low)
The bottom line is the others finally got sold while tech held up. That’s been my thesis in the month of August, and until recently, that thesis was wrong. I won’t put too much weight into the action of one day that was also the last day of the month. With tomorrow as the first day of the new month, I wouldn’t be surprised to see us rally.
New Ideas
XLU has certainly come down more than I wanted, so I can’t blame you if you want to fade me. But I continue to think the Utes are, like the bonds, trying to bottom. The DSI is down to 14 for bonds.
For those who keep asking me if I see anything of interest in the staples, let me note I have been jotting down Procter & Gamble (PG) as a possible base. It has been in a relatively tight trading range since March. My guess is I am a bit early, but that’s a lot of sideways action.
Today’s Indicator
The 30-day moving average of the advance/decline line did not budge Monday. The math says it ought to head back down next week.
Q&A/Reader’s Feedback
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I know folks hate when I say this, but when it comes to NVDIA (NVDA) the pattern I see is that it goes sideways for months on end, threatens to break down, and then rallies. Then it sucks everyone in just before it, then goes sideways for months on end. Right now it’s in one of those sideways moves. When we looked at it before earnings, I said I would be a buyer around 210 (at a test of that downtrend line). But do I think it is going somewhere special? I do not. Let’s call the current range 190-250. Perhaps when/if the market sets us up with another oversold condition with too much bearishness, NVDA can have a good ramp.
I actually thought Netflix (NFLX) was worth a shot near the lows, and it has done a very quiet push upward to resistance (blue line). I don’t love it here, but I suspect after a pullback, it makes another try for the more serious resistance between 85-90. A pullback to that 76-77 area seems doable.
L3 Harris (LHX) is a terrible chart, making lower lows and lower highs. But it is at the bottom of a channel so it ought to rally.
