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Going Sideways Fast

On April 29, the S&P closed at 4,211 and today it stands at 4,224, let's see where we could go -- and where we're likely to go.

The Market

So, we rallied. And that makes the market still in this giant sideways pattern that we have been in for months. On April 29, the S&P closed at 4,211 and today it stands at 4,224. I think that is unlikely to change for the time being.

What would make me change my mind is if this short-term oversold condition in the market can lift the indexes into the end of the quarter (midweek next week) and such a lift is replete with negative divergences. If that were to happen, then I would likely look for a more significant move on the downside in July. But barring that, it looks to me like the group rotation (either/or market) is what will keep us in this sideways market that goes from overbought to oversold and back again.

I am a bit surprised to see the put/call ratio end the day at .83, because the anecdotal sentiment I see is that everyone thinks the market is just fine from here. So, let me report that the Daily Sentiment Index (DSI) for the Volatility Index is at 20, which means if we get much more rallying in stocks and the VIX falls much more, the set up is going to be the same as it was a week ago: too much complacency.

I still think we are more apt to do some more work in the sideways action. Perhaps the indexes pull back a bit tomorrow or Wednesday. I want to end by noting that the iShares 20 Plus Year Treasury Bond fund (TLT:Nasdaq) tagged an upside target late last week when it got to $146. That was in conjunction with the DSI at 83. My guess is that there will be more rally attempts, but that area around $146-ish will turn out to be a high water mark zone. Keep in mind back in late February when TLT got to $136 intraday the DSI got to single digits. We had a rally and a marginal lower low, but that was basically it for the move. This move up could turn out to be similar, but the inverse.

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New Ideas

Just prior to my vacation, we looked at Shopify (SHOP) - Get Free Report with a positive eye and it has had one heckuva run in the past week or so. That base measures to $1,550 and that’s what it tagged today before backing off. The stock has done nothing wrong, but I am in favor of taking something off the table up here.

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In May we looked at Twitter (TWTR) - Get Free Report with a positive eye and a chance for a gap fill. It has been a slog on the way up, but it is now just about a buck away from that gap fill.

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I find myself jotting down Amgen (AMGN:Nasdaq) as a chart to warm up to here. It’s a decent risk/reward since under $235 I know I am wrong.

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Today’s Indicator

The 30-day moving average of the advance/decline line is not oversold. Well perhaps I should say this differently. I think it will go up for the next few days, but as we near the end of the quarter and enter the new quarter, I expect it will head down again. That’s a short-term oversold, but an intermediate-term overbought situation.

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Q&A/Reader’s Feedback

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.

I have been relatively neutral on Intel (INTC:Nasdaq), but I did think it had the chance to fill that gap overhead a month ago when semis rallied, but that was wrong, because all it did was rally to $58 and back to $56. If you have patience, then I do think as long as the stock stays over $54-ish it’s probably OK to buy, because that gap fill overhead is still there.

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Freeport MacMoRan (FCX) - Get Free Report broke a significant uptrend line, so now I believe rallies back to that $40 area should be sold until the stock can build a base from which to rally more strongly.

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I will admit as a bottom fisher, I would say Baidu (BIDU:Nasdaq) is a chart that intrigues me because you know exactly where you are wrong (under $180) so the risk/reward is good here. I think that $200-$210 area will be a trouble spot on the first time up if it can get there.

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