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A Backoff Is In Order.

After seven straight up days, the S&P is definitely short-term overbought. There's also some resistance at this level.

The Market

We’re now at seven straight up days for the S&P, which is a long run and would definitely make it short-term overbought. I figure I should also point out that there is some resistance here on the S&P.

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As I am sure you noticed breadth was a laggard again today but not enough to change any indicators. The number of new highs on Nasdaq increased while the NYSE contracted. So we have a mixed bag.

It really is sentiment we need to discuss because today we saw some giddiness we have not seen before. Let’s begin with the AAII Bulls which jumped 9 points to 47%, the highest since last summer. The bears fell four points to 28%. I suspect we will see the Investors Intelligence bulls rise next week but that remains to be seen (I like it when the two confirm each other).

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Then there is the NAAIM Exposure Index. Recall these folks were at 55 just two short weeks ago. Now they are at 98. Readings in the upper 90s or over are yellow flags for me.

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Then there is put/call ratio which has been trending oh so low of late. The 10-day moving average is not yet at an extreme, but with the equity ratio at 8 straight days under 0.50 I expect the 10-day moving average will be extreme early next week and could turn upward. The chart is shown below.

The DSI is now at 85 for the S&P and Nasdaq is at 84. The VIX is at 13. Until breadth rolls over the indicators the bullishness is not bearish. However with the S&P at resistance and bullishness getting a bit extreme in certain places a backoff is in order.

New Ideas

Let’s begin with a reminder that the measured target off the head and shoulders bottom in OIH was $225. Keep in mind the DSI for oil got to 93 well over a week ago. Taking some profits is a good idea.

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SoFI Technologies (SOFI:Nasdaq) reached the initial target that I put out there from the head and shoulders bottom and it tagged the downtrend line. Some profit taking is a good idea. If this got back in the $area I’d take another look at it to buy.

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Old Dominion Freight Line (ODFL:Nasdaq) has been terrific for us. It has done nothing wrong, although it is up 14% in just over a week. It also is very close to the measured target off that September/October consolidation ($318-$320). I would sell some up here as folks have finally noticed the transports and the truckers.

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After hours Facebook (FB:Nasdaq) is down. They report earnings Monday so I hate to get in the way of earnings since it is a wild card but if $320 holds I’d consider it a retest.

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Today’s Indicator

The 10-day moving average of the equity put/call ratio is discussed above.

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Q&A/Reader’s Feedback

Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.

I have had my eye on Fastly (FSLY) - Get Free Report and now have been asked by two to look at it. I do think it is trying to make a bottom but that $55-$60 area is going to be tough to get through without doing much more work. I think it can get there but I think it will stall out there. I suppose if it gaps up over $60 I would change my mind.

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SunPower (SPWR:Nasdaq) should really, after a brief rest, attempt to eat through this resistance. The only issue is that the resistance goes all the way up to $37 so getting over this 30 area just clears a small hurdle, doesn’t make it a full fledged breakout. I would prefer not to see it under $27.

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Sunrun (RUN:Nasdaq) was a stock I thought might breakout in July but instead it came back to the lows. Getting itself up and over that line around $55 would at least be the first attempt at exiting the downtrend/sideways that it has been in since March. I would prefer to see it stay over $46-$47.

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It used to be that retailers were a good bet in the fall but sometimes around Thanksgiving it was time to exit the trade. So when I was asked about Ralph Lauren (RL) - Get Free Report I was surprised to see it has promise. I drew in a resistance line around $125 but as you can see there is resistance all the way up. I like that it crossed the downtrend line. If it can hold steady for a few more days it might have enough energy to get over 125.

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