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More Than a One-Day Stand?

Will the market’s rally call us in the morning – and more importantly, will it hang out for a while? We’ll even put up with its bad breadth.

The Market

We got the rally. The key question is if we can get more than one up day. Do you know why I say that? Because it has been five weeks since we have been able to string together more than one green day in a row. Doing so would change the pattern.

Away from that, we saw the S&P once again make a lower low than the prior day (and last Thursday) and still there were fewer stocks making new lows on the New York Stock Exchange. Last Thursday – at least for now — saw the peak reading at 2,377 new lows on the New York Stock Exchange. Tuesaday saw 1,324, another decline from yesterday’s reading of 2002.

Nasdaq also saw a lower low intraday than yesterday, and here too there were fewer new lows. Last Thursday saw 2,097 new lows. Monday had 1,937 and Tuesday had 1,106. That needs to continue.

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Now, I want to remind you once again that after we see the peak reading in new lows, there are still months ahead of ups and downs. There are still months ahead of (typically) lower lows in the indexes. It’s just that the drying up of selling must begin somewhere. And it becomes a process.

I’d offer you this as well. The McClellan Summation Index is still heading down, as it has been since mid-January. As of the close, it needs a net differential of positive 3,800 advancers minus decliners to halt the decline. I point this out because last Thursday, it needed positive 7,000. Again, positive 3,800 is a long way away, but we are looking for signs that some of the extreme selling is drying up. The chart is shown below.

I want to end this discussion by noting that the breadth of the market was terrible. At positive 670, it was the worst breadth the market has seen on one of these huge up days. Some will spin it positively. I cannot. Poor breadth is poor breadth.

What I did notice, though, to go along with Monday’s observation that they sold the FANG and Semis, is that they did not hop right back into the FANG stocks alone Tuesday. There seemed to be a lot of short covering (buying?) elsewhere.

Finally, the credit exchange-traded funds did not have stellar days, either, with SPDR Barclays Capital High Yield Bond fund (JNK) - Get Free Report and iShares iBoxx High Yield Corporate Bond fund (HYG) - Get Free Report up on the day, but iShares IBoxx Invest Grade Corp Bond Fund (LQD) - Get Free Report fared quite poorly.

New Ideas

Let’s go back to the chart of TLT, since bonds took it on the chin today. I still have that uptrend line at $150 I am eyeing. Should that break the next support is around $145. We have seen a shift in Bond Sentiment from that $98 reading in the DSI down to the current $61. Therefore sentiment, in my view, is now in the middle of nowhere.

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For the person who had asked me to look at AbbVie (ABBV) - Get Free Report a few weeks ago (and I wondered it if was a head-and-shoulders top) I would note it has likely shaken out the weak holders now and bounced off a line. Resistance is now around $82.

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Today’s Indicator

The McClellan Summation Index chart is below:

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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 about United Parcel Service (UPS) - Get Free Report last week and was surprised it had held up. It continues to hold up well. There is some resistance in this $95 area, but if it can get over this area (there are two lines here, so it’s important if it can do it) then I think $100-$102 could be next stop to fill the gap, or close to it.

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Since I said something nice about the exchange-traded fund for gold (GLD) - Get Free Report on Monday, I was asked about VanEck Vectors Gold Miners exchange-traded fund (GDX) - Get Free Report. That low looks pretty good but all that resistance that starts at $26 is going to be tough to get through the first time up. If you thought you owned too much gold over the last week when it was falling it is not a bad idea to take some off the table at resistance.

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If Mastercard (MA) - Get Free Report can get back to $260-$270, I’d sell it there.

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