Finally, People Are Bullish

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.

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.

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.

Today's Indicator

The McClellan Summation Index is discussed above.

Q&A

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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.

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.

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.