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NYSE Lowers the Volume

Signs of market weakness could spread.

The Market

Hold onto your hats because I am not going to tell you the biggest standout in today's statistics was sentiment! I am going to point out that net volume on the NYSE was the most negative it has been since Feb. 4.

That day saw the S&P 500 lose eight points, so it's not that terrible relative to today's loss of three points on the S&P, but what such poor breadth has done is halt the rise of the McClellan Summation Index using volume. That was one statistic I thought for sure could handle a few down days. Yet I was clearly wrong. And that is the first sign of an intermediate-term indicator getting shaky.

The McClellan Summation Index using the advance/decline line is still rising, but it will only take a net negative reading for breadth of -600 advancers minus decliners. One week ago, when the S&P was still here at 2110 and the Russell was lower, that reading was at -1200, so we've seen deterioration this week.

There is still a chance it can get saved -- we've seen that plenty of times in this market -- but typically once we see signs of some weakness in one place, we start to see it develop elsewhere. Thus I should note that over on Nasdaq, where the Summation Index for volume has been strong and net volume has only been red one day in the last 12 trading days, it will take a net differential of -900 million shares (that's up volume minus down volume) to halt this indicator's rise. Considering Nasdaq hasn't had a down day in a dog's age (!) that says the first down day it has could very well halt this indicator's rise.

I would also point out that the put/call ratio's 10-day moving average appears to be on the verge of turning upward. It has been declining since the low, as I have indicated every time we discuss the one-day readings, but today it ticked upward. That, too, is a change, especially if there is follow-through. The chart is shown below.

I still believe we should pull back and rally again, but we now have two indicators -- one short-term (put/call ratio's 10-day moving average), one intermediate-term (the Summation Index) -- that appear to be in the process of turning. It now appears March could be a volatile month.

New Ideas

I was asked to follow up on the chart of SPDR Gold Shares (GLD) that I had here two nights ago. It did in fact bounce, but each time it tried to rally it has been squashed to close off the high of the day. For now, $117 is resistance and $115 is support. I suspect there will be one more pullback in the next several days. A pullback toward $115 that holds would actually have a teensy-weensy head-and-shoulders bottom on the chart.

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Today's Indicator

The put/call ratio's 10-day moving average is discussed above in detail.

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Q&A

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Everyone seems to like AbbVie (ABBV). When we last checked on it, I had thought it would rally and break again, which it did. It has since had a nice bounce, almost to the place it was the last time we looked at it. I think there is a ton of resistance overhead, but if the stock can hold on into this small dip and stay over this $60-ish area, then I think it can enjoy another rally. My question, though, is if it can rally enough to eat through the resistance that starts at about $63 and goes all the way up. If it can rally to that downtrend line, I'd surely put it in the "improved" category.

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The reason I don't trust Exxon Mobil (XOM) here is because of those three spike lows. As you know, I am a believer that spike lows tend to get tested the first time down, which means that after a stock has had a spike low I expect the next trip down will see the stock hold and rally again. The third or fourth trip down does not always hold so easily. Right now XOM has lower highs and those three spike lows. I would rather be outside looking in than inside wishing I was out. If it doesn't hold on this next trip down, there is a target near $75-$76. If it holds and starts to rally, I can always change my mind.

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Longtime readers know that every time we look at eBay (EBAY), I like the chart and think it will break out to new highs. And almost every single time, I have been wrong. There is some old resistance in this $59-$60 area, so I surely wouldn't chase it here. If it pulled back to $57, I might be more interested in buying it, especially if it appears it wants to rest there and then re-rally. Right now it looks tired to me, not having rested once in the month of February.

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I am not a fan of the large-cap biotech stocks, as you know. They are not necessarily bearish, but I think they are more apt to stall out than go higher. I was asked to look at some of the smaller names, so you will see them covered over the next several days. High bases, of which Agios Pharmaceuticals (AGIO) is one, are not my forte, but as long as the stock holds over that $100 support level it has a chance to make another move higher. A break of $100 and the target is near $60, so I wouldn't fool around.

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Edwards Lifesciences (EW) is another one of these biotechs with a high base. I don't trust it much, but the stop is under that downtrend line (currently $132). Any decent push up and over the old high around $137 would be a breakout, with a target near $160.

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