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Can the Market Keep on Rocking?

There are already small signs of a stall.

The Market

Can you believe it? We finally made it over Dow 20,000 and the partiers were out in full force. Look no further than the fact that CNBC, which typically brings us "Markets in Turmoil" specials right near lows, is bringing us a Dow 20,000 special tonight.

Everyone seems convinced this will bring the retail investor back into the market. So I suppose they are all looking for the Great Fool. But let's look at a few statistics. Last night, we looked at the last time the index put/call ratio was this low (Dec. 13). It was where the red arrow resides on the chart of the S&P below.

Today the put/call ratio for ETFs sunk to an astonishing low of 62%. Curiously (or maybe not so curiously!), it was also on Dec. 13 we saw it so low. You can see what the market did thereafter: right back into the chopfest. In other words, we didn't keep on rocking.

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If we go back to the next two previous times, we see somewhat similar action. Last summer we went into the giant sideways chop. And December 2015 marked a top. I cannot find a time the market kept on ramping.

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In addition, today was the first time breadth faltered a bit. The emphasis is on "a bit." Just to put it in perspective, Tuesday's rally saw the S&P tack on just shy of 15 points yet breadth put in a nice showing of +1,450. Wednesday saw the S&P add just over 18 points and breadth was +825. So you can see there was more lagging on Wednesday than Tuesday.

This does not mean breadth is negative; it remains solid even if the McClellan Summation Index seems to just churn around here. I think this means we are more likely to go right back into a chopfest and maybe some downside.

New Ideas

I was asked about Johnson & Johnson (JNJ) - Get Free Report because it gapped down and is rebounding. First, it's a drug company and you know how I feel about the drugs longer term (they are trading vehicles for the time being). As some background, I was quite bullish on this stock until last summer. There was a measured target around $115 to $120 and it tagged it and that was enough for me (it did go on to $125-ish thereafter). In late December, I was asked about it again and noted if it got to $115-$116, it was a gift, to sell it. I do think now the gap can be filled around $114-$115, but again I'd be more interested in selling it once it gets into that mid- teens area. Someday I will like it again, I'm sure, but for now it's just a trade to resistance.

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Today's Indicator

The Volume Indicator is now at 50%. In the low 40s, it gets oversold so right now it's neutral.

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Q&A

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.

Sprouts Farmers Market (SFM:Nasdaq) would usually be my kind of chart (I like 'em down and out) but it scares me because it hasn't budged at all in an up market. Yet I'd be willing to take a shot on the long side with a stop under $19, and the next target is near $15 to $16.

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I was asked to follow up on NRG Energy (NRG) - Get Free Report, which we've looked at twice in the last six or seven weeks. I was a fan of it because it had a head-and-shoulders bottom. However, I cannot believe how far it has run since breaking out -- and with nary a down day since it bounced off that neckline. There is a measured target here in the $16 area, so I suspect a pullback would not be out of the question, but when a stock is that strong I'd look for it to fill that gap overhead in the $17.50 to $18 area.

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Coty (COTY) - Get Free Report is shaping up to have a very small bottom in place. It has earnings next week, so there is a risk, but over $20 and I see a gap fill in its future, which is near $22. I'm a fan.

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