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Ping-Pong on the S&P 500

Have you seen that range? Let's check it out, as well as new highs, the TLT and natural gas.

The Market

Here is the oddest thing that I have seen in the last five trading days. It’s the close of the S&P 500. If we start with last Thursday’s close and we go through today’s close, it’s as if we have a ball that is being thrown back and forth.

Witness the numbers:

Thursday: 3956

Friday: 3992

Monday: 3957

Tuesday: 3991

Wednesday: 3958

Clearly a move outside of those closes changes the pattern, but let’s recall in that same time frame (from Thursday’s close) breadth has actually kept pace. By that I mean from Thursday’s close through today’s close net breadth has gained 300 on the New York Stock Exchange. The S&P is up two points in that time.

Yet, Thursday saw 75 stocks make new highs on the NYSE (you thought I’d let a day go by without discussing new highs, didn’t you?!). Today’s new highs were 53. In that same time the McClellan Summation Index has continued its upward climb. As of last Thursday’s close, however, it needed a net differential of negative 3,500 advancers minus decliners to halt the rise. As of today it needs negative 2,000.

Now, negative 2,000 is still a cushion, but it’s smaller than negative 3,500. It also means we can now halt the rise in one trading day.

Why do I keep fussing over this? Because I really do believe the buying has dried up in the last few days. I am also fussing, because by next week the intermediate-term will be overbought. After that it gets harder to make a case for more rallying until we get back to an oversold condition.

Then there is the weekly sentiment. The Investors Intelligence bulls are now at 38.6%, which is the highest since we began heading down in August (the August peak was 45%). The bears are at 32.8%. For the first time in two months there are now more bulls than bears.

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If you want some good news, the Summation Index is still rising. And the put/call ratio today was 1.22, which means folks decided put buying was the way to go today. Maybe we’ll get another rally back to 3,990 tomorrow, but without an increase in new highs I’d be taking profits into such a rally.

New Ideas

As a reminder, I believe energy stocks are vulnerable to a decent pullback in the next several weeks. Natural gas, however, could be ripe for another short-term bounce. As long as UNG (UNG) - Get Free Report stays over $19 that’s my view.

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We’ve had a terrific rally in bonds, but the bond fund TLT (TLT) - Get Free Report is getting a bit stretched and near resistance now. I would be inclined to take something off the table now.

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Today’s Indicator

The Volume Indicator got to the mid-50s this week, which makes it overbought.

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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 by clicking on the "email Helene" link.

I would like to find something nice to say about Medtronic (MDT) - Get Free Report, but it’s difficult. It has visited $80 three times now, so we have to assume that the next trip down it will break. That makes the only good news that you risk just over two bucks to make maybe $5 on a trip back up to the downtrend line.

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If Wolfspeed (WOLF) - Get Free Report bets into that $100-$105 area, I’d be a seller.

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Scotts (SMG) - Get Free Report has been in a downtrend for so long it’s hard to imagine it will cross the line but if it can hold 60 I’d give it the benefit of the doubt to do so.

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