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Making My List, Checking It Twice

I have a long list of negative divergences, so here goes....

The Market

I have a long list of negative divergences.

I have a list of indicators showing us sentiment is either extreme (bullish) or on the verge of being euphoric. Then there is the momentum side of things, where we are into short-term overbought territory, but not quite intermediate-term overbought yet. Finally we have signs that participation in the market narrowed last week -- that’s the negative divergences.

Let me list the negative divergences. The number of stocks making new highs was fewer on Friday than it was on Monday and Monday was less than a few weeks ago. That means it is getting harder to find stocks that go up to new highs. This is true for both the Nasdaq and the New York Stock Exchange.

There is breadth, which, despite a 3% rally in the S&P last week, did not see one day where the net differential between advancers and decliners was more than positive 850. Compare that to the prior week, when we were lifting off the oversold condition and there were two days with readings of positive 1,800 or more. However, the McClellan Summation Index has not turned south despite the lackluster breadth.

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The up volume on Friday was 44% on the NYSE and 50% on Nasdaq. That means the market was very concentrated in the index-moving stocks. We even saw the number of stocks making new lows on Nasdaq push up to 42.

The either/or market remains intact and the easiest way to see it is the S&P gained 3% last week and the Russell 2000 was down on the week.

In terms of sentiment, we reviewed most of the indicators last week. The Investors Intelligence bulls are at 61%. The American Association of Individual Investors bulls are at 57%. The National Association of Active Investment Managers have lifted their exposure to 90 from 52.

There are the put/call ratios, which are not yet "too bullish," they are likely to get that way within a few days, though. The CNN Fear and Greed Index is only at 60%, which is well off the recent lows at 40%, but not nearly as high as January when it was 70%. It was 90% in late December.

Then there is the Daily Sentiment Index (DSI), which now has the S&P at 90. It has Nasdaq at 91. And the Volatility Index is at 10. These are daily readings, so one down day resets them, but they are all three at an extreme now. Readings over 90 or under 10 are extreme. Since the intermediate term is not yet overbought, while the short term is, I tend to look for a choppy week when that happens.

This early April rally arrived on schedule and has been highly concentrated, but now I think as we get into the latter part of April we are likely to see a pullback.

New Ideas

Walmart (WMT) - Get Free Report has had a nice run since we looked at it with a positive eye a few weeks ago. I am still eyeing that gap fill, but now the downtrend line is in play, as well. So, let’s call the initial target $142-$144.

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I continue to hold out hope that VMWare (VMW) - Get Free Report can break out. Yet, my patience is getting worn thin. It keeps threatening and then disappointing. I can’t even decide where I would give up on it so I will stick with it for now in the hope it can get up and over that resistance.

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Today’s Indicator

The new highs – or lack thereof! — are discussed above.

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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 was asked to update the chart on Lumentum Holdings (LITE:Nasdaq), because it has gone nowhere for two weeks. Yet, I still think it is trying to bottom and it ought to be buyable in the upper $80s.

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Yeti Holdings (YETI) - Get Free Report is a nice chart. It measures up to around $90-ish.

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Upstart Holdings (UPST:Nasdaq looks like a flag to me but if it breaks last week’s low of $120, I‘d say the chance of testing 80 and maybe filling that gap near $60 go way up.

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