Will Questionable Tech Earnings Be Enough to Change Sentiment?
With tech stock earnings disappointing investors, does this mean that we’ll see a change in sentiment? Plus, three new ideas from me.
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The Market
Another day with questionable earnings from the tech/semi space. Let’s see if we can get a change in sentiment from this. The first test will be if the QQQs can close under 700. That is a long way away, though, as the QQQ closed at 715 and even with today’s whack, they were only down ten points.
The Nasdaq itself is a bit closer to the breakdown level. It comes in around 25900 on a closing basis but around 25750 intraday. Nasdaq closed at 26184. It is my speculation that if we break these levels, we could see a real change in sentiment. Of course, if folks just do the rotation (either/or) shuffle, maybe sentiment won’t change.
However, the put/call ratio has been creeping up. The ten-day moving average is at .89, so there is still some room for this to move up, but when I first started complaining about this, it was at .80.
Away from that, everyone is now a fan of the others. Folks who have built their careers on owning tech stocks all of a sudden tell us how much they like the non-tech stocks.
On that topic, would it surprise you to know that upside volume on Nasdaq was actually more than downside. Oh, by a fraction, but considering Microsoft and Google traded so many shares, that’s impressive.
It’s not been enough to turn the Nasdaq McClellan Summation Index upward, though. Anyway, I would like to see some panic or at least a higher level of bearishness.
As for the others, the RSP has had a fantastic run in October and while I still think we favor it for now you should know it is short-term overbought and up against some resistance. Traders might want to take a few profits.
New Ideas
Pulte (PHM) has had a great run since I recommended it a few weeks ago, but it is up against some resistance now. In this market, I would take a few profits just in case it can’t cross that line.
KKR (KKR) has had a nice run as well since I thought it was a good tax-loss candidate. It has some resistance in the 96-98 area. Earnings are out late next week.
On the other hand, Alcoa (AA) has been terrible since I said I thought it was a good tax-loss candidate. Yet like a moth to a flame, I continue to be drawn to it as a potential rally candidate. Reminder: these are all trades.
Today’s Indicator
The ten-day moving average of the put/call ratio is discussed above, along with the chart.
Q&A/Reader’s Feedback
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Antero Resources (AR) is up too much for me to love it, but as long as it stays over 40, it ought to be okay. It’s just overbought, having rallied nearly 30% in a month.
Meta (META) is oversold enough to rally, but I prefer when META spends some time forming a bottom rather than making a spike low. So, a bit of a rally and then back down would be a better setup. Notice the three higher lows in August, and even in June there was a little pullback after the initial rally.
Cisco (CSCO) is a stock in a downtrend. At 108, it is in the middle of nowhere. If it came down into that 100-102 area, I’d start looking for a bounce, but overall, the pattern of lower highs and lower lows needs to change to get excited.
Several times in the last few months I have thought Nucor (NUE) was going to break out, and several times it teased and went plop. So, if you promise to use a stop under 260, then the chart is okay.
I don’t like the chart of SMH just because of the lower highs. But it refused to break down. If it comes down and holds 540, I might be interested in buying it again.
Palantir (PLTR) has earnings on Monday, and I hate to ‘play’ earnings. With that as the caveat, the stock had better stay over 185 or the October rally will look like a failure.
MercadoLibre (MELI) broke down on a gap. But it has a spike low similar to the EWZ chart we looked at yesterday. So, I would expect it to rally within a few days. I’d sell a rally back to the underside of that trend line (1750-1800).
