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An Unsettled Market

Let's look at sentiment, Nasdaq's volume and volatility -- and why today's action hasn't cleared up anything.

The Market

Today’s market cleared nothing up.

The S&P was red, but breadth was positive, so that’s good. But the Russell 2000 was up more than 1%, and for a move like that, breadth’s positive 400 showing was a laggard.

Instead, let’s talk about Nasdaq’s volume. I have showed you the chart of the McClellan Summation Index for Nasdaq using volume. It turned up a few weeks ago, for the first time since February’s downturn. Overall, I consider this a plus. Better breadth means more stocks to choose from, it also means it’s bullish for the market.

For the last 10 trading days, net volume for Nasdaq has been positive. That means there has been more up than down volume. That’s impressive, considering Nasdaq only had its first two consecutive up days in a month. But that also means Nasdaq is knocking on the door of being overbought. This is the longest streak it has seen since November. There was one harsh down day and then it was heading back up again.

One difference between now and November remains sentiment. The Volatility Index was coming down from a reading over 40 and was hovering at 22. Now, it has come down from 28 and is hovering near 16. What is somewhat similar, though, is the Daily Sentiment Index (DSI). It was at 16 after that run; now it is at 19.

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The question is if you think we are ready to launch a whole new up leg, as we did in November. I think we are more apt to see more of what we’ve had which is mostly sideways, mostly group rotation. For example, while growth stocks have improved in recent weeks, industrials and banks have stalled out and gotten a bit droopy. I think as summer wears on we can expect more volatility not less, but we haven’t seen a lot of deterioration underneath yet. That would change my view. Sentiment continues to be problematic for me.

New Ideas

Someone asked about TripAdvisor (TRIP:Nasdaq) about a month or so ago and I did not like the chart: I believe it was in the mid- to-upper $40s at the time. But it has since come down and is trying to form a small "W" pattern. It’s probably a decent trade to resistance around $47-$48.

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I would also like to follow up with the person who inquired about Shopify (SHOP) - Get Free Report. It did stop at resistance just shy of $1,300 but had a nice pullback to $1,200 and seems to be curling under again. It might need a bit more time but holding in the $1,200 area would be a positive for another push upward.

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Today’s Indicator

The 30-day moving average of the advance/decline line is overbought.

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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.

Yeti Holdings (YETI) - Get Free Report is attempting a breakout and doing so by going over $90. There is only a next measured target of around $97-$98, but there is also the 90/100 rule that says 90% of the stocks that make it to $90 will get to $100, so I’d hang on with a stop back under around $88-$89.

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I desperately want to believe that Take-Two Interactive (TTWO:Nasdaq) has had its correction and is gearing up to breakout over $190. I think it will do it, but I don’t know if it is imminent. There is a lot to eat through there, so time would help. You see, even if it cracks over $190, it runs into trouble at $195 and all the way up. So more time sideways under $190 would give me more confidence that it can eat through that resistance.

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Molson Coors Brewing (TAP) - Get Free Report has a measured target in the $64-$66 area, so it ought to make it there over time.

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Disney (DIS) - Get Free Report looks like it is forming a giant top, doesn’t it? A big head-and- shoulders top. Yet, I think the stock should have one more rally and if it cannot get over 180 then the next trip down would be problematic. So the big test is if it can get over 180 on a rally within the next week or so.

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WestRock (WRK) - Get Free Report is one of those stocks that I liked very early on in the mid-$20s and then sold way too early, in the low $40s. If this stock breaks this $57 area, then it’s correction time for it. If it holds then maybe it just keeps on cranking. That would mean the risk/reward isn’t bad here but I just think these industrial stocks need a break and a correction now.

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