I thought the market as a whole acted so much better last week and Monday than today. One main reason is there was so much wishy-washy-ness about the market until today. Recall that it was just last Friday that the put/call ratio for the VIX was under 20%, implying an awful lot of bets on a higher VIX/lower stock market.
Today everyone is "all in." It's not just the chatter. The equity put/call ratio has been under 60% for three consecutive days, something it has not done since early September! It would not surprise me to see a choppy or down day tomorrow or Friday, just to relieve the short-term giddiness.
Yet the 10-day moving average of the put/call ratio did in fact turn down, as I noted last week that I thought it would.
Despite the fact that the number of stocks making new highs is still not greater than it was in early October, there was a decent increase today. Nasdaq saw 289 new highs compared to 349 in early October. The NYSE saw 242 new highs compared to 304 in early October. I may look back and decide this was dumb, but I'm willing to give this some more time to improve since we are not yet overbought (see last night's letter for that discussion).
I am also pleased and surprised that the Russell 2000 did not only not bother to stop at the resistance line I drew in, but gapped up over it. Support is now at about $150 on the Russell 2000 ETF (IWM) - Get Free Report (back at the line).
Heck, despite the fact that the FANG stocks led the rally today, the ratio of IWM to the Nasdaq 100 ETF (QQQ:Nasdaq) didn't give much back at all.
I remain bothered by the Investors Intelligence bulls, which have only meandered down to 61.5%. So if we don't see the number of new highs improved by the time we get back to an overbought condition and if sentiment gets giddy, as it seems it will, I suspect we'll see another retreat in the market in early December.
For now I continue to focus on the IWM/QQQ ratio and the fact that it has managed to hold its own, much of what I have focused on for the last two weeks.
Finally, Happy Thanksgiving to all my American readers! There will be no Letter tomorrow evening. I will be back at it on Monday morning.
In late October, I recommended Skyworks Solutions (SWKS:Nasdaq) and it had a great short-term run and then retreated. I've got my eye on it again because if it can hold over this $107-$108 area, I think it makes another try upward in the coming weeks.
The McClellan Summation Index has turned upward. But you still need a magnifying glass to see the upturn. It will take a net differential of -900 advancers minus decliners to turn it back down.
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Alaska Air (ALK) - Get Free Report is working on a little head-and-shoulders bottom. If it can get over this $66-$67 area, it has a good shot at getting to resistance near $72. I still prefer United Continental (UAL) - Get Free Report in the "down and out and can't get off the mat" airline sector. But at least ALK had a one-day rally last week, which means it has more friends than UAL right now.
When we last checked in on CVS (CVS) - Get Free Report, I said if it breaks $74 it won't be a good stock to own anymore, and it clearly hasn't been. I have some minor good news and some bad news. Let's begin with the bad. The bad is that there is an unfulfilled downside measured target of $64. Could that plunge to just below $67 have been "it" and "close enough"? Maybe.
The good news is that if it can get over that red line, the chances of a rally to resistance in the $74-$76 area are high. And if it can get up there then pull back, perhaps it begins to form a bottom of some sort. It is far too soon to know if a base/bottom will form, but the first step is stopping the rot by crossing a downtrend line.
We looked at Amgen (AMGN:Nasdaq) when it first cracked in late October, and my view was that the price was likely good but the timing might be elusive. I still feel that way. The spike low is being tested as I write. I would point out, though, that my view has mostly been that the rally would end up being the right shoulder of a head- and-shoulders top, especially if it fails at or under $180. I think it rallies, but that's the danger in the chart.