It was one of those days. Again. Mega-cap tech took the indexes down, but breadth was pretty much flat. So once again, the indicators didn’t change.
Well, there is a minor change. Remember how the McClellan Summation Index stopped going down earlier in the week? It is still doing so — it is at a significantly lower high though — but gave us a moderate down day in breadth and that improvement will be gone in a heartbeat. There simply is no cushion to maintain the upside with a day of poor breadth.
Many will laud that the Russell 2000 was up — barely — and we ought to because that is a feat in this market. But it is still leaning overbought, so it’s not like it is oversold and hanging in there. The same with the Utes, which I still like, but despite them being in the green, they too are overbought up here.
But the banks? Oh my banks! I have been using the Bank Index, because I prefer an index over an exchange-traded fund, but even the SPDR S&P Regional Banking ETF (KRE) - Get Free Report, has eked out a higher high for the month of July. I am still of the mind that the banks can rally. KRE was up 2.5% today.
As for mega-cap tech, the channel is still intact. Here is the chart without the upper line. I have said I think we come down and tag that lower line and I still think so. Use a thick pencil and it comes in around $250-$252.
The issue with the Invesco QQQ (QQQ:Nasdaq) is that potential double top. A break of $250 on the QQQs –one that you can see—changes that channel to a broken uptrend line.
Apple (AAPL:Nasdaq) broke that long uptrend line – and I don’t much want to get in the way in front of upcoming earnings, so let me just note that there is light support here at $370. Good support is back at $320. Perhaps it gets oversold before earnings next week, but I thought you should see the chart.
Interestingly Microsoft (MSFT:Nasdaq), which just reported, has a different chart, because it has not broken the uptrend line. If it breaks around $200 it will break the uptrend line and the prior low, which would then give it a measured target around $185-$190, which happens to be support.
Finally, I would note that Lumentum (LITE:Nasdaq) got to resistance, and while it stayed green, it did reverse. A pullback to just under $85 would be helpful now, since it’s up over 10% in just over a week.
The 10-day moving average of the equity put/call ratio seems to be unable to go lower. It is actually trying to turn up. And that is typically associated with some downside or increased volatility in the market.
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Prudential Financial (PRU) - Get Free Report has a big dividend and a decent chart. I am always nervous when the yield is so high (will they chop that dividend?) but as long as it stays over $60, it ought to get the benefit of the doubt that it goes higher.
When I recommended the home builders back in April, folks probably thought I was nuts because who would buy a home in the middle of a pandemic? Yet the charts said they were OK. Now the question is when to re-buy Lennar (LEN) - Get Free Report. I would think that the low $60s, a test of that line would be a decent spot to have another look at it. The thin line is a good one, but the thick one is better in my view. So let’s split the difference and say either side of $65 I would have another look at it.
The GLB X Silver Miners, or SIL, (SIL) - Get Free Report is an exchange-traded fund for the Silver stocks. I am able to calculate a measured target around $45. It hasn’t done anything wrong yet, but with sentiment so high on silver (the DSI was 93 the last few days) I’d be inclined to take some profits up here or at the very least wait for a pullback near $37-$38 before looking at it again.