Why Isn’t Oil Fueling a Move Higher in the Transports?
Oil down, transports up. That’s the old relationship. But it isn’t working these days.
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The Market
Note: Since Friday is a holiday, the next edition of Top Stocks will be this weekend (Sunday).
I really thought we would rally this week. I thought we might have a pullback on Tuesday and then rally again. But so far, that is not what has transpired. The window is still open for an oversold rally, but when the market doesn’t do what I expect, I must reassess.
We did fill Monday morning’s gap, so the market ought to try and rebound from that. We filled it both on the S&P, Nasdaq, and the QQQs. What surprised me most about the last two days is how light the volume was on the QQQs.
Recall last week we saw multiple days with volume over 90 million shares, but this week the daily volume is hovering more in the 40-50 million range.
And yes, I know the SOX was solidly green today, and folks will say as long as the semis are okay, the ‘market’ is okay. But once again, I want to highlight the Transports and oil.
The Transports, which ought to be the biggest beneficiary of lower oil, are down almost five percent this week. That doesn’t make sense, does it? As we know, I am not very good at narratives, so I won’t make something up, but the fact that no one else is observing this is concerning to me. I think the Transports should come down to that line around 21000.
Then there is oil, which is down ten bucks in a week. The chart looks terrible. It’s already broken the uptrend line (not shown, but it broke it around 82) and hasn’t quite yet reached this lower channel line that I have drawn in. But the DSI is now 17 on WTI. It’s too late to be bearish, but if this touches that line (72-73), the DSI falls under 15, and I’d have to start warming up to oil.
New Ideas
One stock that bucked the decline today that was not a semiconductor was Raytheon Technologies (RTX), a stock I recommended in mid-May. It did cross the downtrend line, but now it is heading into resistance. I’d be inclined to take a little something off the table.
Today’s Indicator
The Volume Indicator still sits at 49%.
Q&A/Reader’s Feedback
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I don’t love the gap down on the chart of Broadcom (AVGO), but the stock gapped, slipped some more, and that was that. It’s oversold enough to rally to that 410-420 area. But look at the chart: it has a habit of gaps down that then go sideways with a downward bias (see December to April) before rallying again. So, for now, I wouldn’t be surprised if we see the stock come down again this summer (after an oversold rally short-term).
Almonty Industries (ALM) will have done something wrong if it breaks under 15. And I would also get concerned if it cannot get back over 21 in the next few weeks because that would be a lower high. For now, the lines are holding, especially the lower one.
Carmax (KMX) filled the gap from last summer. I don’t love the gap down today, so if this cannot stabilize over this 45-46 area, I will think the rally is over.
ServiceNow (NOW) is coming into support (around 90-95) and has to be getting oversold down here. If I thought the market was intermediate-term oversold, I’d be wondering if this was a head-and-shoulders bottom. But mostly it does look like it’s trying to form a bottom
AAR (AIR) is short-term overbought but has an as-yet-unfulfilled measured target in the 140-ish area. Insert aar here.
