Friday’s action did very little to change my view. I had said we should go up and down, and that’s what we’re getting. I still think for the most part the market is on a bit of a roller coaster ride.
It takes time to get those intermediate-term indicators lined up. For example, a few weeks ago the Citi Panic/Euphoria Index went over into Euphoria, and despite the rally last week, the market has essentially made very little progress since. It correct, it came back and it started down again. That indicator is now just a smidgen below Euphoria. As I said, it takes time to move these.
The 10-day moving average of the put/call ratio has also finally rallied. But is it at the place that we can say all the complacency has been wrung out of the market? Not yet.
We’ve already seen the Investor’s Intelligence bulls back off from near 60% to 47%. They will probably uptick this week, but isn’t it possible that if we get some more downside we might get this reading under 45%, which would be bullish, having shown us a big change in sentiment?
Last week’s rally, with the exception of Wednesday, was mostly in the stock that move the indexes. So if you’re wondering why “your” stocks didn’t look like the indexes last week, then look no further than the cumulative advance/decline line.
Or look to the fact that the McClellan Summation Index has been heading down for weeks now and the rally last week didn’t even turn this upward for a day. This is what the average stock is doing.
I realize these choppy periods are difficult. We’ve basically had it this way for a month now. With any luck, we’ll pullback some more and sentiment will get more bearish. I already saw folks on television concerned after Friday’s pullback.
Energy Select Sector SPDR (XLE) - Get Free Report looks terrible, having broken down two weeks ago. But on a short-term basis, if oil cracks under $50 and XLE makes a higher low, there’s a trade on the long side in it. Especially since Barron’s finally put the “ESG” trade on its cover.
The new highs contracted on last week’s rally to a new high.
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Amazon (AMZN:Nasdaq) has been a good trade for us, since I warmed up to it back near $1,740 in November and December. It took time — and earnings – to work though. I’ve been asked for an upside target. There is a measured target near $2,200. There is probably a higher one I can calculate as well, but let’s begin with $2,200. Let me also say I cannot chase the stock up here. If for some reason it had a plunge back near $1,900 I would buy it, though.
I do not trust Chipotle Mexican Grill (CMG) - Get Free Report, which just reported last week. Let me try and explain why. It broke out in January, in a hot stock market for growth stocks. And it essentially went nowhere. Sure it has come back to retest the line, but why was it so lethargic on that January rally? That’s what makes me not trust it. Having said that if the stock trades under $840 I think it makes a real correction, maybe down to fill that gap near $780-$790 more likely.
Alphabet (GOOGL:Nasdaq) has a measured target in the $1,550-$1,560 area, so as long as it stays over $1,425, it ought to be able to get there.