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Extremely Overbought Condition Backs Off

As the chop-fest continues, we could get some month-end mark-ups tomorrow.

The Market

You know I am going to say it, so we may as well start with the obvious: Today was a chop fest! Yet another chop-fest. And it still gives me reason to compare this period to late July, when we reached an overbought reading that was similar to what we had nearly two weeks ago, and then went into a chop fest for a few weeks.

So let's get to the statistics for the day. Breadth remains very strong. Since it is not as strong as it had been, we have seen the oscillator back off from that extreme overbought reading. I would surely not call the market oversold, but we are no longer extremely overbought.

As we head into the final days of the month, we could get some month-end mark-ups tomorrow.

Back to the statistics. The transports continue to act weak, so they need to be watched here. Typically, the longer the divergence goes on, the worse it gets. However, in this market, the longer the divergence goes on, the more folks notice it, which means the divergence will matter less since they are all prepared for it.

The same is true for the financials. They simply cannot get out of their own way. Note, however, that while many people commented on the financials today, the sector staged a late-day rally. Watch this group.

But the sector that is really bothersome to me is the utilities. I realize no one likes this group, but my view is that as long as the Utes are doing well, the rest of the market gets supported. When the Utes falter, the rest of the market tends to follow. With interest rates down this week, the utilities should have acted better. The Utilities Select Sector SPDR (XLU) - Get Free Report has minor support at $40, but the really good support is back at $39. If XLU comes all the way down to $39, the rest of the market is unlikely to be terribly firm for long.

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Finally, I think the Market Volatility Index (VIX) is a good tool when it gets jumpy. When it is not jumpy, we can make much out of it, but it is a coin toss. I don't know why -- or quite frankly what it means -- but the VIX has not made a lower low. In fact, it has not come close to a lower low in this entire ramp up. If it starts trading much higher (i.e., over 16), that will be a sign of caution for the market, in my view.

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In the meantime, I will stick with the choppy view. And I will again note that 1840 on the S&P 500 is the level to watch on the downside; we continue to hold or bounce from there.

Read Helene's latest column here.

New Ideas

We'll start with a follow up. We had Starbucks (SBUX:Nasdaq) as a short quite some time ago. When it got down near $70, we thought it was time to bounce. It did bounce, and it has now come back to $70. The sentiment on this chart used to be quite bullish, but it has become very quiet and maybe even a bit negative. If today's bounce has follow-through over $75, we could get a big round of short covering.

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It is possible that the UnitedHealth (UNH) - Get Free Report chart is a base before a breakout. It has toyed with this before without succeeding. But if it can do so now, then the target is around $85-ish

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In Transport Land, J.B. Hunt Transport (JBHT:Nasdaq) has barely had an uptick since the beginning of the year. If this chart cannot hold here at $70.50, the first target is obviously $68. But after that, I think the low $60s is doable. In other words, bulls had better hope this stock holds.

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The chart I see as most vulnerable is Celgene (CELG:Nasdaq). It made a lower low today and was unable to get over that downtrend line on the rally, despite the iShares Nasdaq Biotechnology ETF (IBB:Nasdaq) soaring to higher highs. The stop would be quite far away at a close over $165. But this looks to me like it can easily test that $150-$152 area.

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Today's Indicator

The volume indicator shows a series of lower highs. Remember, this is up volume as a percentage of total volume. Why so poor?

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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.

A few weeks ago, I was quite positive on platinum and the First Trust ISE Global Platinum ETF (PLTM:Nasdaq). But the fund has disappointed me by going absolutely nowhere. It has not yet broken that lower line, but I now fear that a break of $11.50 is in the cards. If the fund can save itself over $11.50, then it still has a chance at being a giant base. A break of $11.50 should have you exiting in a hurry.

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Since I am a fan of the homebuilders -- as you know, KB Home (KBH) - Get Free Report has been a favorite of mine -- I was asked about Ryland (RYL) . It just broke out today. But because I hate to see people chasing stocks, I cringe at developments like this, especially when they occur on news in a choppy tape. However, that base measures to the low to mid-$50s. You would be better off buying when the timing is quieter. But if you are long, the stop is under $44, because you never want to see a reversal back into the base happen so quickly.

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Sanderson Farms (SAFM:Nasdaq) had a tentative breakout today. The first measured target would be near $80, but longer term, the target would be closer to $90-ish. In the near future, you would not want to see it trade back under $75. But if you are looking at the longer term, then the stop would be under $72.

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