You know I have to start with my favorite ratio. Russell 2000 ETF (IWM) - Get Free Report/Nasdaq- 100 ETF (QQQ:Nasdaq) not only rallied today, it made a minor higher high over last week's high. And that continues to be an important piece of this rally.
The transports rallied. Finally! I was beginning to wonder if we would ever see that rally to resistance I thought we'd get (last week). I think it is going to be hard for the overall index to eat through this resistance that begins here at 176, but I like the fact that the red line has been crossed. So I'd take a little off the table but I would not be bearish, especially since I am still waiting for United Continental (UAL) - Get Free Report to break out of the little head-and-shoulders bottom it has formed.
The banks did great and our friend Citibank (C) - Get Free Report got to the downtrend line and first resistance. Is it too much to ask that it cross the line and make a play for about $75 before retreating again? Because what I've draw in blue would make for a better chart.
Let me point out that breadth was good, not great. Let me point out that net volume on Nasdaq was pathetic (but of course the big-cap fan faves were mostly red today). Let me also point out that the number of stocks making new lows expanded today (not a good sign for when the market next retreats). And the number of new highs did not exceed last week's readings.
In addition to that, sentiment has moved to giddy. The Daily Sentiment Index (DSI) for the S&P 500 is now 85% and for Nasdaq is 84%. We haven't discussed them much because, since they got there in October and the market backed off in November, there wasn't much to say as they quickly retreated into the 60s. But now they are extreme.
And then there is the equity put/call ratio at 50%. Under 50% and it's bearish. Is that splitting hairs? Maybe, but we saw 50% in mid-June just before the S&P 500 gave up nearly 2% in two weeks.
In addition, the put/call ratio for ETFs was under 100% for the fourth consecutive day. We last saw that heading into mid-July 2016, which stalled the market out and kept a lid on it. Prior to that, we saw it heading into Christmas 2015, which was a terrible time to get long.
With the market heading into an overbought reading late this week and these very giddy sentiment readings, my guess is we see a pullback in early December.
I have been a fan of Wells Fargo (WFC) - Get Free Report for a while, but today I was asked if I liked it better than Citibank. It is hard to say. I do like that WFC could not go down on what was seemingly bad news today. And if it ever breaks out, it measures to the low $60s, but which one I like better is not so black-and-white for me. I like them both. I would also like to see a pullback in both next week.
I have been a fan of CF Industries (CF) - Get Free Report for quite some time. It has not done well of late, but the longer-term chart is still positive. However, I was asked if Potash (POT) was OK, too. If POT can ever get through that $19.75 zone, it should have a decent short-term pop toward the $21 area. Quite frankly, the longer- term chart says it can make it to near $24, but POT is not known for doing much more than popping and dropping!
The McClellan Summation Index is still rising. The cushion is -1,100 advancers minus decliners.
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I am quite tempted to like Mednax (MD) - Get Free Report because it feels like it wants to fill that gap overhead. I would like it if it could close the gap below and get to about $47 first because that would seem complete. But if it can get over $52, it should try to fill the gap near $56. My guess is it won't be easy, though.
I am not much of a fan of the Western Digital (WDC:Nasdaq) chart because it looks like it is more of a top than a base, but it has support in this $84-$86 area, so it should try to bounce again.
Dillards (DDS) - Get Free Report must not have enough shorts in it or else it would have soared like the other retailers! It does look like a base is forming, but until it clears 62.50 it's still a stock in a downtrend. But a move from here to about $60 is still 10%!