Traders Are More Bullish, But We're Not Out of the Woods Yet
Let's discuss the quality of recent rallies and whether spike lows are doing the right thing. Then, we'll look at the charts of CMG, GOOGL, AMD, NVDIA, CORN, WEAT, and SOYB.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Market
Are folks more bullish than they were yesterday? Anecdotally, I would say yes. Statistically, only a smidge
Keep in mind that the resistance overhead at 5400-ish and the QQQs at 460-ish that I have highlighted are very obvious, as are the gap fills. So, if the CPI tomorrow takes the market down after today’s rally, it would not surprise me if they tried to rally them one more time later this week.
As for today’s rally, it was quite similar to last Thursday’s rally. Breadth was quite similar but today it fell a bit short. Last Thursday, we saw 85% of the volume on the upside for the NYSE (about 79% for Nasdaq). Today we saw 79% up volume for the NYSE and less than that for Nasdaq.
There is nothing horrible about this data, but since we had a 90% down day last Monday, the general rule of thumb is that the market is not out of the woods until you get two days over 80% up volume or one 90%. I don’t know that a time was put on that study but for now, over a week later, we still don’t have it.
Be that as it may, I want to revisit the spike low discussion we had last week. My premise is that spike lows tend to hold the first trip back down to them. Chipotle Mexican Grille CMG is a perfect example. Last week’s spike low was visited today and held. I don’t know that it can do more than fill that gap above, but when I talk about spike lows holding on the first trip down, this is the chart I want you to keep in mind.
New Ideas
Alphabet GOOGL had some bad news after the bell today. I think last week’s spike down holds on the first trip lower so for a trade, I’m willing to buy a pullback in Alphabet, especially if it stays over 160.
Today’s Indicator
The McClellan Summation Index stopped going down today. It needs another good breadth day to get it to turn up.
Q&A/Reader’s Feedback
Advanced Micro Devices AMD should have enough to run into that 150-160 area on this leg. But overall, that pattern from May through July measures into the 110-120 area so I would expect if it takes another trip back down it would be a positive for the stock.
NVIDIA NVDA will run into some resistance at 120 but mostly it looks to me as if it filled that gap in the mid 90s so pullbacks in the next week or so should be buyable.
The only good news I have for CORN is that it is at some support and has a measured target down here. Unless/until it can at least get back up over 18—or 18.50 would be better—it’s a chart in a downtrend that hasn’t had a capitulatory low yet.
It is possible WEAT is making the right shoulder of a tiny head and shoulders bottom but it feels like there is a lot of guessing at that (the neckline is downslanting and the right shoulder is lower than the left shoulder. For now I see 5.20 as resistance.
Now, I know I wasn’t asked about Soybeans but if you are looking at Corn and Wheat, please look at Beans SOYB That is what capitulation looks like. It hasn’t even attempted to rally once since early May. It’s getting close to that line and the DSI fell to single digits today. If you want to speculate in grains, this is the one to do it in.
