Can the market get any more boring? It’s as if the overbought reading has brought us a dead market.
Breadth did stay positive today, which continues to be a good thing. The DJIA has been up for eight consecutive days. We went to 10 days in August before the volatility showed up.
But the transports still lag. And the number of stocks making new highs has not improved much. And now the put/call ratio chimed in at 76%, the lowest reading since July 26.
We’ve got the FOMC announcement tomorrow, which could bring some sparks to the market. Perhaps bonds will be most concerned about the Fed. So let’s revisit the chart of the iShares 20+ Year Treasury Bond ETF (TLT) - Get Free Report. We last visited this chart about 10 days ago and I noted the Daily Sentiment Index (DSI) had scooted over 80 and thus confirmed my bearish bias on the bonds. The DSI has backed off to a more neutral 56.
I do not think TLT will break this line on this trip down, so if it got to about $125, I would cover that short. I would note that as much as I don’t like the utilities either, they have been solidly red but have not seen a breakdown yet either.
Tomorrow we’ll see the oil inventory numbers, which could be moving for crude oil. I actually think the chart of the U.S. Oil Fund (USO) - Get Free Report, an ETF to be long oil, is still OK as long as it stays over $10, but with the DSI at 83 I can no longer think oil has room to run very far. If USO breaks back under about $10, then the rally is done for now.
Here’s where my dilemma with oil comes in. The DSI is high (makes me cautious) but if Transocean (RIG) - Get Free Report can get over $9.50, it can run to $10.50 before it hits any resistance. And the stop is so close at $9.
The McClellan Summation Index is still rising. It will take a net differential of -1400 advancers minus decliners to stall it out.
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Intel (INTC:Nasdaq) is in the hot semi group, but it is at resistance (and has been up seven or eight straight days) so it's a bit overbought. I would buy a dip back at the red line (about $36.50) with the hope that the next time up it can break out. I admit I have my doubts on a breakout -- because Intel always seems to disappoint.
In the semi space, I have liked Analog Devices (ADI:NYSE -- wrote it up a few months ago with a bullish pattern). I don't like that spike high near $90, but that's still a few points away. I'd love to see ADI consolidate over $84 for a few days before making another try upward.
Cisco (CSCO:Nasdaq) keeps doing well until it bumps up against the trendline. So I see no reason it shouldn't continue to make its way there before retreating again.
Vodafone (VOD) - Get Free Report actually looks like a head-and-shoulders top, but if it can get up and over $29 it might get a new lease on life. When I first recommended it earlier this year, the target was only $29-$30, and as you can see, it has struggled since arriving there. A break of $28.50 has me out of there.