Feeling Bullish but See Nothing to Buy?

The Market

There is a consistent theme from almost every guest interviewed on television these days. They are bullish, because of the Fed, but they can’t find anything to buy.

So wait, do they not like the banks, which are down 15% from the recent high? They all loved the banks up there. Or what about the cyclical stocks, you know the “reopen the economy” stocks that are down in some cases 15% to 20%? They were fine in early June, but when the stocks are down 15% to 20% these guests can’t find what they want to buy?

I am going to call that complacency, since I think there is nothing else to call it. We see it in the Investor’s Intelligence readings, which show the bulls at 57%, the highest reading since January. The bears are at 18%, which is lowest since February. More so, the bulls are now more than three-times the bears and that has typically been problematic for the market over an intermediate-term basis. In other words, that needs to come down for markets to perform well over the intermediate term.

As for Wednesday’s market, we saw 90% of the volume on the downside, well actually, 91%, so we probably see a rally attempt Thursday. But I suspect before this is over, we will see the Invesco QQQ (QQQ:Nasdaq) back at or near that lower channel line. It has been the case for months, so why stop now?

We have also gotten to the point where the McClellan Summation Index is definitely heading down, but now it requires a net differential of positive 3,300 advancers minus decliners to halt the decline. That makes it a bit oversold.

But the real situation in the market is that so many stocks and indexes are staring at the June 11 lows so close, but this time their 200-day moving average lines come in right there, as well. Well, OK, for the small cap IWM (IWM) - Get Free Report it’s the 50-day moving average line.

For the S&P, even if it breaks the 200-day moving average, the 50-day moving average is right below it so this whole area is support for now. Unless we gap under these levels we are likely to hold the first trip down.

IWM is now trapped between its 50- and 200-day moving averages as well, but that head-and- shoulders top is still a possibility.

What I suspect happens is we get some sort of crummy bounce and head down again. If we break this area, especially on the IWM, it’s bearish.

New Ideas

My inbox is filled with questions on gold. I am still a fan, especially longer term. Shorter term, the DSI got to 90 on Tuesday, so it was due a pullback (it is now 83 so it has corrected that short-term excess). A few days of sideways should help work off the overbought reading.

I do not have a strong view on GDX (GDX) - Get Free Report, the exchange-traded fund to play the gold stocks, but in early June I revisited the chart of Kinross Gold (KGC) - Get Free Report, which I had been asked about and said I thought it was OK to buy at $6. It had a little run to $7 and is now pulling back. I still like it.

Today’s Indicator

The Volume Indicator is overbought.

Q&A/Reader’s Feedback

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MercadoLibre MELI:Nasdaq) has not done anything wrong yet, but it has hit its upside target. I suspect it makes its way down to that uptrend line around 900.

Inovio Pharmaceuticals (INO:Nasdaq) measures to the $23-$25 area, so Wednesday’s move takes it right to the target area. Therefore it probably needs a correction either via time or price, but I would not chase it up here.

I am intrigued by the chart of PagerDuty (PD) - Get Free Report. I would like to see it pullback to that $25-$27 area and make sure it holds, but that’s a nice base that has developed. I would call the short-term noisy, but longer term the chart should work.

Box (BOX) - Get Free Report has a habit of looking like it is breaking and then dying (see late November, or even late May this year). I think the stock longer term is going to the mid- 20s but the near-term is questionable. If it managed to back off to that $17-$18 area I’d get much more interested.