Skip to main content

Pleased With Small Caps Rally

Friday's small caps rally was pleasing while big cap tech took a back seat.

The Market

I have to admit that I was quite pleased to see the small caps, or I should really say, the non-mega caps rally while big cap tech took a back seat on Friday, but it hasn’t changed very much in the market. I still think the best we can do for now is chop. I am still inclined to think for the time being we’ve seen the low in bond yields (and the high in TLT). If we give another try up in price (down in yields) I still think this general area is going to keep a lid on prices. The only group that truly benefitted from that move in rates on Friday was banks/financials. For example, the banks gapped up and held the rally, having crossed the downtrend line but now sit at some resistance around 128 on the Bank Index. I do think it eventually pushes upward some more though.

Image placeholder title

And as much as Nasdaq was down for the first time all week, the selling was concentrated in a handful of names. So, you see, not much changed except a little group rotation.

I continue to have my eye on the transports, waiting to see if they can do what the banks did and cross that downtrend line. That really has been the key to the market: identify when a former favorite group gets ignored or hated and then stops going down.

Image placeholder title

There are a few other indicators that are worth noting because something has changed in the last month or so with regard to them. First of all, the put/call ratios are trending higher these days, after nearly a year of super low readings. Take a look at the 30-day moving average of the equity put/call ratio. It is hard to tell, but this past week it made a higher high for the first time in a year. It tells me options players are no longer buying calls on individual stocks hand over fist as they have for the last year. Typically, I’d consider that bullish except that it has been steadily rising since early July. Perhaps it reflects the value stocks more than the growth stocks, but it is something to watch.

My inclination is that any whack in the market from this point would get us a fear in a hurry.

Image placeholder title

And why would there be a whack? Well, the DSI for the VIX is now at 11. And that tells me volatility is likely to pick up in August. New Ideas

My old friend Packaging Corp Of America (PKG) - Get Free Report is trying to bottom. As long as it stays over $136-$137 I think it can work its way higher.

Image placeholder title

Today’s Indicator

The new highs remain pathetic but at least the new lows on Nasdaq did not expand on Friday.

Image placeholder title

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.

Tech Target (TTGT:Nasdaq) doesn’t trade very much but it does have a good chart. There is a measured target in the $87-$90 area. Would love to see it stay over 80-ish.

Image placeholder title

APA (APA) - Get Free Report met its downside target when it traded to $17 a few weeks ago. For now, it looks trapped in between there and $20. I think it begins to develop in the weeks ahead. If I am wrong it will be because it gets smacked under $17.

Image placeholder title

VanEck Vectors Gold Miners exchange traded fund (GDX) - Get Free Report is not a great chart but it has support in the $32-$33 area. What’s more the DSI on Gold is down to 16 so I would think that despite the chart look there will be a bounce in the offing this week, especially if it slips under $33.

Image placeholder title
Dow is the Most Vulnerable to Profit Taking

Dow is the Most Vulnerable to Profit Taking

Despite the newfound focus on the Dow Jones Industrial Average last week, it turns out we may be seeing the last gasp of outperformance here.

How Hungry Is This Market?

How Hungry Is This Market?

Here's what I'd like to see happen with this rally -- I'd like it to show some FAANGs. Here's why -- and a look at Microsoft's chart, news highs and more.

Sloppy With a Chance of Rallying

Sloppy With a Chance of Rallying

Here's why I see another rally before the weekend, even amid the messiness, and a bump for Amazon.

Sloppy With a Chance of Rallying

We Can Rally Just a Bit More

Energy stocks have a lot of complacency in them.