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April Drums Up a Rally

Here’s what it would take for me to say ‘enough’; also let's look at Apple and Facebook.

The Market

The beat goes on. By that I mean the rally into early April should continue. Even if we have a down day early this week I would expect another lift into the end of the week, because that’s the earliest I see us getting to an overbought reading again.

My own Oscillator will get back to an overbought reading by Friday. The 30-day moving average, which got oversold this time (it did not in the early March rally) has a bit more time on its hands, as it won’t get back to an overbought reading until sometime in mid April.

Yet breadth, while it was terrific on Thursday, continues to lag. The cumulative advance/decline line still hasn’t made a higher high. It is close, but recall for months on end it was the leader and now it is lagging.

The McClellan Summation Index did finally turn upwards, which quite frankly I consider it a negative that it took so long to turn upward, but direction matters and up it is.

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The number of stocks making new highs is downright pathetic. The New York Stock Exchange, which had over 500 new highs in early March is now clocking in at just under 200. Nasdaq had over 700 in February and is now showing us 132. Neither is what you want to see when the indexes are making new highs.

Despite the great breadth on Thursday, upside volume on the NYSE was a mere 67% and Nasdaq was 66%, all very disappointing readings.

On the sentiment side of things, the AAII bulls backed off a tad. The four week moving average of bears is in a spot that has come close to highs in the market, so we need to watch that. The Investors Intelligence bulls are 54%, but I suspect we’ll see that scoot right back up this week.

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Then there is the Daily Sentiment Index. The DSI for the Volatility Index is now at 11. The DSI for the S&P is at 82. A VIX DSI in the single digits or a DSI for the S&P over 90, or both, would be “enough” for me. Should we get that toward the end of the week as we are getting short-term overbought, I’d start thinking we’re heading back down again.

The one sentiment indicator in the bullish camp is the NAAIM Exposure Index, as that is now 52, which says there is room to get them back in the pool. I think this reflects more on the growth/FANG names, so it could flip quickly, too, now that those stocks have finally gotten on board.

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Finally my Saturday Twitter poll was the most lopsided ever for the bulls. 69% are looking for the next 100 points on the upside. As you know by now that has typically meant a day with ups and downs, not straight up.

Should we end up back in a market where tech stocks are all there is and breadth lags, I would consider that a negative for the overall market for the latter part of April. But for now, I feel we should watch the divergences, but give them a chance to improve while we’re not yet overbought.

New Ideas

Apple (AAPL:Nasdaq) has become the least talked about stock in forever. Remember when it was all anyone could talk about? I think it has a chance at rallying. In fact, if we are going to rally some more this week I think AAPL should play along. If it can’t get over $127 that would be a negative sign for when we get back to an overbought reading. For now it gets a shot at it provided it doesn’t crack under these recent lows around $119.

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I feel the need to follow up on Facebook (FB:Nasdaq) because it is stalled at $300. Barron’s put it on the cover this weekend with a positive view which is cringeworthy if you are long it. You might recall when the stock was $15, Barron’s had it on the cover panning it. That was the low. So I consider this important if it can’t get over $300 and hold it this week. I’d give up on it then, which I hate to do, because it has been a great trade from that $255-$260 area.

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Today’s Indicator

The new highs and new lows are discussed above. I would also note the Hi-Lo Indicator is now at 42% which is moderately oversold (under 20% is a good oversold).

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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.

We have looked at Gilead Science (GILD:Nasdaq) with a positive eye (as I have with many of the drug stocks). I do however think that $68-$70 is going to be difficult to crack easily. There is a lot of resistance to eat through.

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EZU is an exchange-traded fund to be long the Eurozone. I can get a measured target around $49.

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Activision Blizzard (ATVI:Nasdaq) seems OK here. I would fret about that lite resistance at $98-$100, though. If it can map out as I have drawn in blue it would be a positive.

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GDX (GDX) - Get Free Report an exchange-traded fund for gold stocks has been in a steady channel since August last year. I see no reason it shouldn’t tag the upper line around $36. In fact this recent decline did not make a lower low, which should make $36 doable.

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