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Oh, So Now You Care…

Suddenly, there's concern about what's lurking in the market.

The Market

As we have discussed for a month, the market's underpinnings have been weakening, starting with breadth. Most market players didn't care, though. Somehow, today they cared.

I saw more folks all of a sudden "concerned" about what is lurking in the market. Why today? I don't know. My guess is because even if they don't own the stocks that are going down, the fan faves aren't going up anymore.

Also consider that the number of stocks making new lows on the NYSE is at 130. Not only is that far more than the number of stocks making new highs, but we haven't seen more than 130 new highs in over a week. That means your chances of picking a lower on the long side have gone up significantly.

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Breadth was terrible today. But most of the selling was in the oils and biotechs.

I know I sound repetitive when I say this, but it's better that we go down. Going down with red breadth for days on end gets the market to an oversold condition. Going down also stirs up sentiment by removing some of the complacency that had become far too present in the markets.

I had great hopes that the Investors Intelligence readings would back off under 60% this week, but I was to be disappointed; the bulls sit at 63.5%, down from 64.5%. I call that not enough.

Let me take a minute, though, to explain that it is very rare for the major senior indexes to top out all at once. Typically, about one-third of stocks will top out before the indexes do, one-third will top out with the indexes and one-third will top out after the indexes. That is why I spend so much time focusing on breadth. We have to see persistent weakness underneath before the indexes care. Sometimes that takes months, or as I showed a few weeks ago, in the late '90s it took more than a year.

In any event, we did get the bounce in the High-Yield Bond ETF (JNK) - Get Free Report last week, but it is back for a retest. If it doesn't hold here, then maybe we get some panic in the market.

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Elsewhere, I have looked for the Bank Index (BKX) to bounce off this support level since last Friday. Today it finally cooperated. The rally will be key because a failure under 101 means it's going to look like the right shoulder of a head-and- shoulders top.

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And the selling in the Russell 2000 eased up somewhat as well.

At least we're getting a sentiment shift – anecdotally -- but I would prefer to see more as we head toward an oversold reading.

New Ideas

The iShares Nasdaq Biotechnology ETF (IBB) - Get Free Report looks downright awful. But a few weeks ago I drew in this support line and I still think somewhere in the $300-$305 area it should bounce. My preference would be another day or two down because by then it would be stretched enough to rally.

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Today's Indicator

The McClellan Summation Index is still heading down. As of now it will take a net differential of +2,500 advancers minus decliners to halt the decline. When it needs +4,000 or more, the market is oversold. So I hope you can see that a few more down days gets it oversold.

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Q&A

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.

The utility stocks are starting to look like tech stocks! Dominion Energy (D) - Get Free Report would measure to about $86 from that breakout. Quite frankly, at least this utility still yields 3.7%, unlike so many others that are closer to 3%.

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When I suggested covering shorts in the CurrencyShares Euro Trust (FXE) - Get Free Report a week or so ago because sentiment had gotten too bearish on it, I thought it would rally to $113 and that would be that. Yet today it gapped up to nearly $114. I see the red line as resistance now. That makes it $114.50 but declining as the week goes on.

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Coca-Cola (KO) - Get Free Report has had a superb run. It has a measured target in the $47-$49 area. There is an Investor Day coming next week, so I suspect this may be "buy the rumor, sell the news."

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