Skip to main content

It's About Bonds and Breadth

But the banks need a rest.

The Market

The bulls will say today's market was great because efforts to take it down didn't work. The bulls will also say the transports finally got going.

The bears will point to the utilities, which finally broke under the 50-day moving average. Or maybe they will focus on Nasdaq, which is essentially the same price it was months ago.

I will say all of the above is true, but mostly it's about breadth, which continues to be quite good. It's also about the overbought nature of the market. If it wasn't, we might have run away on the upside after getting over 2500 in the S&P 500, but instead we've milled around like we can't get out of our own way.

But really it's about the bonds. Yesterday I said near $125 on the iShares 20+ Year Treasury Bond ETF (TLT) - Get Free Report and I'd cover my short. TLT got awfully close today and reversed, closing up on the day. I think a small rally, perhaps as far as $127, and then we'll see TLT retreat again. But for now I think it showed us $125 wants to hold this time around.

Image placeholder title

And despite my bearishness on the Utilities Select Sector Fund (XLU) - Get Free Report, there was no breakdown here either. XLU, an ETF to be long the utes, bounced right off support as well. Here too I think we see a rally, the only question is how far it can get. Resistance is not terribly obvious since it begins at $54 and goes all the way up.

Image placeholder title

All of this probably means the banks need a rest after their massive run. Notice that the S&P 500 relative to the Bank Index has collapsed as the banks have rallied (banks outperform when it goes down). It is nowhere near where it was in July. Unless you think it can get there in a straight line without a wiggle, then you'd have to think the banks take a rest.

Image placeholder title

Note: I'd like to wish all who celebrate a Happy New Year for Rosh Hashana, the Jewish New Year. I am taking a few days off -- not for the holiday, but because my stepdaughter is getting married this weekend! The next Letter will be Monday evening.

New Ideas

Cheesecake Factory (CAKE:Nasdaq) has been on my negative list for what seems like forever, so when it changes I feel the need to report. There is a tiny little head- and-shoulders bottom that, if it gets over $42, measures near $46. There is some resistance at $44 but crossing that line would be a good first step.

Image placeholder title

Today's Indicator

The Volume Indicator is now at 52%. Once it hits the mid-50s, it is overbought. This is an intermediate-term indicator.

Image placeholder title

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.

I want to like Macy's (M) - Get Free Report because the yield is so high (7%) and retailers typically do well in the fourth quarter, or at least until early December, but there is a series of lower highs and lower lows on this chart. I suppose taking a stab with a stop under $20 would be OK because if it can rally from a higher low, it should get over $23. It does not trade as well as some of the other retailers.

Image placeholder title

I was asked to follow up on Schlumberger (SLB) - Get Free Report, which I have written up several times in recent months. As a reminder, I had a long-term measured target in the $64 area on the downside and thought, if you were willing to wait, the price was probably a good one. But I also said I believe resistance in the $68-$70 area would be heavy - - too heavy to get through on the first run up. We are here now and I still believe that to be the case. But step back and consider that if SLB pulls back from here to, say, $65-$66, maybe it forms the right shoulder of a head-and-shoulders bottom over time, which gives it a better chance of eating through that resistance.

Image placeholder title

I was also asked to follow up on CME (CME) - Get Free Report, which I have liked for quite some time. There is a first target in the $134-$136 area. And another one near $140. It's had a good run in the last two weeks, so taking a few profits isn't the worst thing in the world because it is into the first target zone. But that's the worst I can say about it.

Image placeholder title
Dow is the Most Vulnerable to Profit Taking

Dow is the Most Vulnerable to Profit Taking

Despite the newfound focus on the Dow Jones Industrial Average last week, it turns out we may be seeing the last gasp of outperformance here.

How Hungry Is This Market?

How Hungry Is This Market?

Here's what I'd like to see happen with this rally -- I'd like it to show some FAANGs. Here's why -- and a look at Microsoft's chart, news highs and more.

Sloppy With a Chance of Rallying

Sloppy With a Chance of Rallying

Here's why I see another rally before the weekend, even amid the messiness, and a bump for Amazon.

Sloppy With a Chance of Rallying

We Can Rally Just a Bit More

Energy stocks have a lot of complacency in them.