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Finally, People Are Bullish

Market intrigue: Utilities vs. bonds

The Market

It took two days of gaps up and sitting around for folks to finally get bullish. I heard it on TV but we saw it in the ETF put/call ratio as it fell under 100% for the first time since mid-March.

Recall that just one week ago this options ratio soared to 200%, indicating plenty of puts being bought. Now it's under 100%, showing a skew toward far too many calls being bought. If you were waiting for folks to "buy in" to the rally, I think we saw that today.

Yet breadth continues to be OK, not great. Yes, the cumulative advance/decline line motors higher. Yes, the McClellan Summation Index pushes upward as well. In fact, the Summation chart is interesting as it now requires a net differential of -2.2 billion shares (when using volume instead of the a/d) and that area is a moderate overbought reading. Curiously, Nasdaq's Summation Index, using volume, has finally turned, but I am still unimpressed considering Nasdaq is over 6000 by now.

Be that as it may, the Summation Indexes are still moving higher.

The most interesting thing I saw in the market today was the trading in the utilities versus bonds. Let's start with the iShares 20+ Year Treasury Bond ETF (TLT). You might recall that while I noted there is a measured target around $127 to $128 on TLT, I thought it would stop around $123 to $124. It went to $125 just to prove me wrong but has since retreated. It is heading back to support now in the $121 area. I think it should bounce from there. I do not expect a higher high; rather a lower high is what I expect.

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I did find it curious, though, that with the bonds taking such a high, the utes were solid today. I have not been a fan of the utes since they tagged 51 in early March as that was a measured target. But if the utes can get over 52, it would be impressive. The next target would only be 53, but perhaps it happens in conjunction with a bond rally later this week.

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Wednesday could/should see a pullback, but until the indicators roll over and reach a maximum overbought reading, I think folks will buy the dips. And then we'll head back down. My own oscillator is not overbought yet.

New Ideas

Earlier in the week, I said I thought oil would enjoy an oversold rally and today it finally had a green day. The Energy Select Sector Fund (XLE) caught a bid as well. Wednesday is oil inventory day, so there is always a risk, but for now XLE continues to find support in that $88 area.

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Today's Indicator

The McClellan Summation Index is discussed above.

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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.

Novo Nordisk (NVO) - Get Free Report had a nice breakout in early April and is into the gap. There is a measured target around $39 to $40.

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It's been quite some time since we looked at CyberArk Software (CYBR:Nasdaq), but this is a chart that continues to try to base longer term in my view. It really ought to be able to get to $55 in the near term.

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VanEck Vectors Gold Miners ETF (GDX), for being long gold stocks, has fallen to near support, yet I am not willing to take a stab on the long side just yet. One reason is that I think the dollar is getting oversold and therefore it should bounce (and gold usually does not do well when the dollar rallies), and the second reason is that, as I have explained, GDX has its best moves up after it has spent time milling around at the lows, not when it spikes down. If it can mill around for a while, I might warm up to it again.

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